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to (1) the losses paid during the taxable year, (2) reduced by
salvage and reinsurance recovered during that year, (3) plus all
unpaid losses (discounted for years after 1986) outstanding at
16 (...continued)
(5) LOSSES INCURRED.--The term "losses incurred" means
losses incurred during the taxable year on insurance
contracts, computed as follows:
(A) To losses paid during the taxable year, add
salvage and reinsurance recoverable outstanding at the end
of the preceding taxable year and deduct salvage and
reinsurance recoverable outstanding at the end of the
taxable year.
(B) To the result so obtained, add all unpaid
losses outstanding at the end of the taxable year and
deduct unpaid losses outstanding at the end of the
preceding taxable year.
For tax years ended 1987 and 1988, section 832(b)(5)(A) provides
as follows:
(5)LOSSES INCURRED.--
(A) In general.--The term "losses incurred" means
losses incurred during the taxable year on insurance
contracts, computed as follows:
(i) To losses paid during the taxable year,
add salvage and reinsurance recoverable outstanding at
the end of the preceding taxable year and deduct
salvage and reinsurance recoverable outstanding at the
end of the taxable year.
(ii) To the result so obtained, add all
unpaid losses on life insurance contracts plus all
discounted unpaid losses (as defined in section 846)
outstanding at the end of the taxable year and deduct
unpaid losses on life insurance contracts plus all
discounted unpaid losses outstanding at the end of the
preceding taxable year.
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