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are to the Tax Court Rules of Practice and Procedure. We use the
term “petitioner” to refer solely to Central Reserve Life
Corporation.
Background
All facts have been stipulated. The stipulation of facts
and the exhibits submitted therewith are incorporated herein by
this reference. Petitioner's principal place of business was in
Strongsville, Ohio, when its petition was filed.
Petitioner is the parent corporation of an affiliated group
of corporations that files consolidated Federal income tax
returns. Central Reserve Life Insurance Company (Central Life)
is petitioner's wholly owned subsidiary. Central Life writes
life insurance and accident and health (A&H) insurance.
Insurance regulators require that insurance companies
maintain defined levels of assets to guarantee that they can pay
their claims when the claims become due. These asset reserves
generally must equal the amount of funds which, when increased at
a stated rate of interest, will allow the company to pay its
claims at their actuarially estimated due dates.
Insurance companies must report their anticipated
obligations for claims on a standard annual statement promulgated
by the National Association of Insurance Commissioners (NAIC) and
adopted by all 50 States. The annual statement characterizes an
insurer's life and A&H obligations as either “reserves” or
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