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the report of respondent's expert, Mr. Merlino, should be made.
Should we decide that a portion, but not all, of the reserve
adjustments proposed by Mr. Merlino should be made, the parties
have agreed upon a methodology for computing the resulting
adjustments to income.
Section 831 imposes taxes computed as provided in section 11
on the taxable income of insurance companies other than life
insurance companies.14 Section 832(c) provides deductions
for purposes of computing the taxable income of an insurance
company, inter alia, for all ordinary and necessary expenses
incurred and for losses incurred. Sec. 832(c)(1), (4).15
Section 832(b)(5)16 defines "losses incurred" as an amount equal
14 For taxable years beginning prior to Jan. 1, 1987, sec. 831
imposed tax as provided in sec. 11 on insurance companies other
than life insurance companies and mutual insurance companies.
15 Sec. 832(c) provides in pertinent part as follows:
(c) DEDUCTIONS ALLOWED.--In computing the taxable income of
an insurance company subject to the tax imposed by section 831,
there shall be allowed as deductions:
(1) all ordinary and necessary expenses incurred, as
provided in section 162 (relating to trade or business
expenses);
* * * * * * *
(4) losses incurred, as defined in subsection
(b)(5) of this section;
16 For tax year ended 1986, sec. 832(b)(5) provides as follows:
(continued...)
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