Utah Medical Insurance Association - Page 2

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               The sole issue for decision is whether petitioner may deduct           
          $45,650,249 for its reserves for discounted unpaid losses and               
          loss adjustment expenses for 1991 and $49,418,509 for 1992.  We             
          hold that it may.                                                           
               Section references are to the Internal Revenue Code.  Unless           
          otherwise indicated, Rule references are to the Tax Court Rules             
          of Practice and Procedure.                                                  
                                I.  FINDINGS OF FACT                                  
          A.   Petitioner                                                             
               Utah Medical Insurance Association (referred to as                     
          petitioner) is a property and casualty insurance company the                
          principal place of business of which is in Salt Lake City, Utah.            
          Petitioner provides medical malpractice liability insurance for             
          physicians in Utah, Montana, and Idaho.  Medical malpractice                
          liability insurance indemnifies a physician against medical                 
          professional liability claims for damages brought as a result of            
          the provision of, or the failure to provide, medical services.              
          Petitioner is, and during the years in issue was, taxed as a                
          property and casualty insurance company under sections 831-835.             
          Petitioner is managed by its board of directors, which is                   
          composed of 12 of petitioner's policyholder-physicians.                     
          B.   Medical Malpractice Insurance                                          
               In the 1960's, medical malpractice liability insurance was             
          generally provided by commercial insurance companies.  Beginning            
          around 1965, commercial insurance companies experienced large               




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