In PLR 200947021, the IRS ruled that income from a trust providing health and welfare benefits to retired state employees is excludable from gross income under section 115. In addition, the IRS ruled that trust payments used exclusively to pay for accident or health coverage of retired employees, their spouses and dependents are excludable from the gross income of retired employees and retired employees' spouses and dependents under sections 106 and 105(b).
See Tax Analysts: "Trust Income is Exempt as Exercise of Essential Government Function," 2009 TNT 223-23, November 23, 2009
Posted by Marc Patterson, Associate Editor, Wealth Strategies Journal.
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