- 21 -
on a “false premise”: “unaccrued unpaid losses are generally not
included in 'life insurance reserves' because they are not
'computed or estimated on the basis of recognized mortality or
morbidity tables. * * *' Sec. 801(b). * * * Thus, the
provisions for 'unpaid losses' need not be superfluous, even if
they include only unaccrued unpaid losses.” Harco Holdings, Inc.
v. United States, supra at 1036; fn. ref. omitted. The Court of
Appeals for the Seventh Circuit also noted that the Court of
Appeals for the Ninth Circuit’s reasoning had a “logical flaw”:
“If ‘unpaid losses’ means all unpaid losses, and ‘life insurance
reserves’ includes unaccrued unpaid losses, then the statute
counts unaccrued unpaid losses twice. Thus the court avoided
making the provisions for ‘unpaid losses’ superfluous by making
them redundant.” Id. at 1036 n.14. The Court of Appeals for the
Seventh Circuit concluded:
Although we are not persuaded by the Ninth
Circuit’s reasoning, * * * we need not reject
Occidental Life * * * out of hand. Instead, we note
that identical language in sections 806 and 801 need
not have the same meaning. Section 806 governs a tax
deduction, while section 801 is a definitional
provision. Deductions are a matter of legislative
grace, to be construed strictly against taxpayers.
Definitional provisions, like section 801, get a
somewhat more liberal reading. United States v.
Consumer Life Ins. Co., 430 U.S. 725, 752-53 n.38, 97
S.Ct. 1440, 1454 n. 38, 52 L.Ed.2d 4 (1977)
(restrictive interpretation given to tax deductions
should not be applied to section 801); Swift, 151 F.2d
at 628-29 (rejecting argument that the predecessor
statutes to sections 801 and 806 should be construed
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011