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B.T.A. 1186, 1193 (1926) (accrued liability for fire loss is
deductible unpaid loss).
An insurance company was a life insurance company under the
1921 Act if more than half of its total reserves were life
insurance reserves. See 1921 Act sec. 242, 42 Stat. 261. This
qualification fraction, which is the genesis of the reserve
ratio, meant that an insurance company could not qualify as a
life insurance company for Federal income tax purposes unless
more than 50 percent of its total insurance reserves was
attributable to life insurance or analogous contracts. See
Alinco Life Ins. Co. v. United States, 178 Ct. Cl. 813, 373 F.2d
336, 347 (1967).
An application of the qualification test under the 1921 Act
was difficult because the 1921 Act failed to define many relevant
terms. Section 163(a) of the 1942 Act addressed this concern by
defining the term “life insurance reserves”, adding the term
“unpaid losses on noncancellable life, health, or accident
policies” to “life insurance reserves” in the numerator of the
reserve ratio, and defining the term “total reserves” in the
denominator of the reserve ratio to include the term at issue;
i.e.,”unpaid losses”. Those provisions were carried forward
substantially unchanged into section 816 as applicable herein.4
4 Sec. 2 of the Life Insurance Company Income Tax Act of
(continued...)
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