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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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