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2. Whether the two reinsurance agreements at issue had
“significant tax avoidance [effects]” under section 845(b), with
respect to petitioner. We hold they did not.2
3. Whether petitioner may amortize the ceding commissions
payable under the reinsurance agreements over the life of the
agreements. We hold it may.
Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the taxable years in issue.
Rule references are to the Tax Court Rules of Practice and
Procedure. Dollar amounts are rounded to the nearest dollar.
The 50-percent ratio described in section 816(a) is referred to
as the Life Ratio.3
2 This holding moots another issue before us; namely,
whether petitioner's disability insurance policies are
“noncancellable” under sec. 816(a)(2).
3 Sec. 816 provides in part:
SEC. 816. LIFE INSURANCE COMPANY DEFINED.
(a) Life Insurance Company Defined.--For purposes
of this subtitle, the term "life insurance company"
means an insurance company which is engaged in the
business of issuing life insurance and annuity
contracts (either separately or combined with accident
and health insurance), or noncancellable contracts of
accident and health insurance, if--
(1) its life insurance reserves (as
defined in subsection (b)), plus
(2) unearned premiums, and unpaid losses
(whether or not ascertained), on
noncancellable life, accident or health
policies not included in life insurance
reserves,
comprise more than 50 percent of its total reserves (as
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