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thereunder a meaning for the word “reserves” that was more
restrictive than the previous definition, stating in the
regulations that only a reserve that related to a “future
unaccrued and contingent” claim would qualify as a reserve for
purposes of the reserve deduction. Regs. 86, sec. 203(a)(2)-1
(1934 Act). The regulations went on to provide that the word
“reserves” did not include “reserves required to be maintained to
provide for the ordinary running expenses of a business * * *
such as * * * accrued but unsettled policy claims”. Id. The
regulations, unlike their predecessors, did not reference any
specific items of the liability page of the annual statement that
would generally constitute a reserve for Federal income tax
purposes.
Much litigation flowed from the Commissioner’s definition of
the word “reserves” as set forth in the 1934 regulations, and
courts held that some of the items which would have qualified
under the prior regulations no longer qualified under the new
definition. See, e.g., Equitable Life Assurance Socy. v.
Commissioner, 44 B.T.A. 293 (1941) (amounts reported on line 9 on
the annual statement were not reserves because they represented
liabilities which had already matured). As to many of the other
items referenced in the pre-1934 regulations, however, such as
the reserves relating to A&H insurance, the courts held that
those amounts continued to be “technical insurance reserves”
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