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(namely, present liabilities to pay death benefits to the
beneficiaries of insureds who had already died) were excludable
from the reserve ratio because they were accrued liabilities.
Respondent attempts in his brief to narrow the effect of that
ruling in this case:
Respondent concedes that a diligent reader must
carefully parse through the tight language of the
ruling to correctly arrive [sic] at its narrow holding.
* * * upon close reading, it is evident that the
ruling simply holds that reserves for certain unpaid
losses arising from life insurance contracts in
connection with a death claim benefit are not
includible in either the numerator or the denominator
of the qualification fraction.
Respondent's attempt is unavailing. Respondent focuses on the
fact that the term “unpaid losses” appears in section 816(c)(2),
but not section 816(c)(1) or (3), and argues that because the
term “unpaid losses” is used only in connection with A&H
insurance, the reserve ratio must include accrued obligations
with respect to A&H insurance and exclude accrued obligations
with respect to life insurance.9 As the Court of Appeals for the
Seventh Circuit stated:
even if we agree that section 801(c)(2) does not cover
unpaid losses on life insurance and can thereby
reconcile Revenue Ruling 72-115 with the Service's
current position, the reconciliation makes no sense.
For if we accept the position of the IRS, then the
reserve ratio test would not measure accrued unpaid
9 Respondent ignores the fact that the term “unpaid losses”
is also included in sec. 816(a)(2), which does include reference
to life insurance policies.
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