- 56 -
transfer of its reserves to a reinsurer. These rules have
similarities to the factors identified by the Congress in the
conference report on DEFRA, with the notable exception of the
factor involving the relative tax positions of the parties (with
which the NAIC would not be concerned).
This factor favors petitioner.
ix. State Determinations
The 1989 Agreement was examined for risk transfer by the
Arizona Department of Insurance and found to have transferred
risk.
This factor favors petitioner.
x. Conclusion
We have analyzed the factors mentioned above. Most of these
factors favor petitioner. None of these factors favors
respondent’s determination. We conclude that the factors show
that the Agreements did not have a significant tax avoidance
effect within the meaning of section 845(b). We conclude that
respondent’s determination to the contrary amounted to an abuse
of discretion. We hold for petitioner on this issue. We have
considered all arguments made by respondent for a contrary
holding and, to the extent not discussed above, find them to be
without merit.
4. Amortization of Ceding Commissions
We turn to the final issue. Respondent asserted in her
Amendments that petitioner was not entitled to deduct or
amortize any part of the ceding commissions. Respondent alleges
Page: Previous 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 NextLast modified: May 25, 2011