Utah Medical Insurance Association - Page 20

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          accounting reserves for unpaid losses.  Atlantic Mut. Ins. Co. v.            
          Commissioner, 523 U.S. ___, 118 S. Ct. 1413, 1415 (1998).  Unpaid            
          losses are those that have been reported but not yet paid, or                
          those that have been incurred, but not yet reported.  Western                
          Natl. Mut. Ins. Co. v. Commissioner, 65 F.3d 90, 91 (8th Cir.                
          1995), affg. 102 T.C. 338 (1994).  Unpaid losses must include                
          only actual unpaid losses as nearly as it is possible to                     




               18(...continued)                                                        
                         (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,              
                    deduct salvage and reinsurance recovered during 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              
                    all unpaid losses on life insurance contracts plus all             
                    discounted unpaid losses outstanding at the end of the             
                    preceding taxable year.                                            
                              (iii) To the results so obtained, add                    
                    estimated salvage and reinsurance recoverable as of the            
                    end of the preceding taxable year and deduct estimated             
                    salvage and reinsurance recoverable as of the end of               
                    the taxable year.                                                  
               The amount of estimated salvage recoverable shall be                    
               determined on a discounted basis in accordance with                     
               procedures established by the Secretary.                                







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