Best Life Assurance Company of California - Page 4




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            of its accrued liabilities and of its unaccrued reserves for 1991                          
            and 1992:                                                                                  

        Reported on Annual Statements                 1991         1992                                
        Accrued liabilities                                                                            
                                                                                                      
              Exhibit 11, CA&H/Medical            $2,666,371   $2,494,121                              
                                                                    ==========   ==========            
        Unaccrued reserves                                                                             
              Exhibit 8, Ordinary & Group-Term Life           1,669,727    2,089,797                   
              Exhibit 9, CA&H/Disability                            419,786      442,261               
                    Total unaccrued reserves                        2,089,513    2,532,058            
                                                                    ==========   ==========            

                                           Discussion                                                  
                  Since 1921, Congress has enacted separate rules of taxation                          
            for life insurance companies and nonlife insurance companies.                              
            Compare sections 801 through 818 with sections 831 through 835.                            
            Generally, insurance companies qualify as life insurance                                   
            companies and are entitled to the related special tax treatment                            
            if more than 50 percent of their total reserves represent life                             
            insurance company reserves as defined in section 816(a).  Section                          
            816, in pertinent part below, provides the following description                           
            of the elements of the life insurance company qualifying 50-                               
            percent fraction and of life insurance total reserves.                                     

                        SEC. 816(a). Life Insurance Company Defined.-– For                             
                  purposes of this subtitle, the term “life insurance                                  
                  company” means an insurance company which is engaged in                              
                  the business of issuing life insurance and annuity                                   







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Last modified: May 25, 2011