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exceed that limitation. In that event, the amount of investment
income at issue that the Trust set aside to provide for the
payment of reasonable costs of administration directly connected
with providing for the payment of health care benefits would
constitute exempt function income that is excluded under section
512(a)(3)(A) from the calculation of the Trust’s UBTI.
It is the position of respondent that, in calculating for
each year at issue the limitation prescribed by section
512(a)(3)(E)(i), only the account limit determined under section
419A, and not the amount of assets set aside by the Trust, must
be reduced by the reserve for post-retirement medical benefits
described in section 419A(c)(2)(A).
Although we have quoted section 512(a)(3)(E)(i) above, for
convenience we restate it here in addressing the contentions of
the parties with respect to the Trustee’s alternative argument.
Section 512(a)(3)(E)(i) provides:
(E) Limitation on amount of setaside in the case
of organizations described in paragraph (9), (17), or
(20) of section 501(c).--
(i) In general.–-In the case of any organiza-
tion described in paragraph (9), (17), or (20) of
section 501(c), a set-aside for any purpose speci-
fied in clause (ii) of subparagraph (B) may be
taken into account under subparagraph (B) only to
the extent that such set-aside does not result in
an amount of assets set aside for such purpose in
excess of the account limit determined under sec-
tion 419A (without regard to subsection (f)(6)
thereof) for the taxable year (not taking into
account any reserve described in section
419A(c)(2)(A) for post-retirement medical bene-
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