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Seventh Circuit in Harco Holdings, Inc. v. United States, 977
F.2d 1027, 1033 (7th Cir. 1992), believe that the NAIC's
treatment of an item in the annual statement is an “authoritative
interpretive guide” as to the item’s treatment for Federal income
tax purposes, and that, when placed in the context of this case,
the item known as accrued unpaid losses does not fall within the
meaning of the term “unpaid losses” for purposes of section
816(c). See also Gulf Life Ins. Co. v. United States, 35 Fed.
Cl. 12 (1996), affd. 118 F.3d 1563 (Fed. Cir. 1997). To be sure,
the legislative purpose of the reserve ratio is to define
mechanically the term “total reserves”, and the fact that an
accrued unpaid loss is not a reserve within the meaning of the
term in the industry of life and A&H insurance leads to the
conclusion that the legislators did not intend for accrued unpaid
losses to enter into “total reserves”.
Respondent relies on Occidental Life Ins. Co. v. United
States, 385 F.2d 1 (9th Cir. 1967), to support his assertion that
the annual statement’s distinction between accrued and unaccrued
items is meaningless for Federal income tax purposes. We, for
the reasons stated by the Court of Appeals for the Seventh
Circuit in Harco Holdings, Inc. v. United States, supra, find
Occidental Life Ins. Co. unhelpful to us in construing the term
5(...continued)
liability.
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