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history of inadequate reserves in 1980-85, makes reasonable
petitioner's estimates of reserves for 1991 and 1992. The fact
that petitioner's loss estimates for 1986-92 proved, with
hindsight, to be higher than actual payments does not make
petitioner's choice of values unreasonable. Petitioner's
reserves for unpaid losses must be fair and reasonable, but are
not required to be accurate based on hindsight. Sec. 1.832-4(b),
Income Tax Regs.
4. Whether Only the Midpoint of an Actuarially Sound Range
Is the Fair and Reasonable Estimate
Respondent argues that, for tax purposes, the midpoint of an
actuarially sound range, which respondent characterizes as "tax
equipoise", is the only fair and reasonable estimate since it
gives no tax advantage to either the taxpayer or to Treasury.
We disagree. Respondent cites no authority for the
proposition that tax equipoise equates with the fair and
reasonable standard. We have held in a different context that
the high end of a range of reasonable values may be reasonable.
See Vinson & Elkins v. Commissioner, 99 T.C. 9, 49 (1992) (for
purposes of assessing the actuarial assumptions of a defined
benefit plan, court adopted as reasonable a retirement age
assumption that was at high end of reasonableness range), affd. 7
F.3d 1235 (5th Cir. 1993). Hurley testified that any loss
reserve amount selected from within the actuarial range he gave
petitioner would be reasonable.
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