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With this backdrop in mind, we turn to the respective
arguments of the parties. Respondent looks to the subject term,
“unpaid losses”, and argues that a plain reading of this term
includes all unpaid losses, accrued or unaccrued. That reading,
respondent continues, comports with the definitions of “unpaid
losses” and “reserves” which were prevalent in the P&C insurance
industry at the time of the 1942 Act. Respondent argues that
Congress, in the 1942 Act, used the P&C meaning of “unpaid
losses” to refer to unpaid losses in the industry of life and A&H
insurance. Respondent argues that the insurance industry treats
an accrued unpaid loss as substantively the same as an unaccrued
unpaid loss and a reserve as substantively the same as a
liability. Respondent acknowledges that the insurance industry
distinguishes between accrued and unaccrued unpaid losses for
purposes of the annual statement but asserts that this
distinction is meaningless for Federal income tax purposes.
Petitioner argues that the industry of life and A&H insurance,
unlike the P&C insurance industry, makes a meaningful distinction
between an unpaid loss that has accrued and an unpaid loss that
has not accrued, and petitioner asserts that the industry of life
and A&H insurance considers a reserve to be different from a
4(...continued)
1959, Pub. L. 86-69, 73 Stat. 112, added the parenthetical phrase
“whether or not ascertained” now found in sec. 816(a)(2).
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