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the term "reserve strengthening" in a life insurance industry
statute in a manner consistent with the taxpayer's
interpretation; (2) respondent's regulation created anomalous
results; and (3) the taxpayer's interpretation of the term
comported with Congress' objective of preventing willful abuse of
the fresh start provision.
Respondent argues in the alternative that we should
determine a lesser deficiency, because all or some of
petitioner's additions to its IBNR and LAE reserves resulted from
management's discretionary adjustments. We disagree. In both
Western National and the present case, case reserves formed the
majority of petitioner's loss reserves and were not adjusted by
management. Moreover, in both cases senior management retained
some discretion to adjust the reserve amounts arrived at through
formulaic computations, and both taxpayers maintained that the
adjustments were made pursuant to actuarial data to ensure the
adequacy of reserves. There were no increases to the reserves
for the period in question attributable to changes in underlying
assumptions or methodology.
To reflect the foregoing,
Decision will be entered
for petitioners.
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