- 6 - insurance company qualifying fraction includes accrued unpaid losses on CA&H insurance policies.1 Best Life argues that the term “unpaid losses” in section 816(c)(2) refers only to unaccrued unpaid losses corresponding to the amounts reflected on Exhibits 8 and 9 of its Annual Statements. Best Life argues that accrued unpaid losses reflect current liabilities, not reserves in the NAIC Annual Statement sense, and that they should not be included in the denominator of the qualifying fraction as part of an insurance company's total reserves. Accordingly, for 1991 and 1992, Best Life calculated that it qualified as a life insurance company under section 816 and timely filed U.S. Life Insurance Company income tax returns claiming life insurance company treatment and deductions under section 806 in the amounts of $615,971 and $712,152, respectively. On audit, respondent treated the accrued amounts (shown on Exhibit 11 of Best Life's Annual Statements) as unpaid losses in 1 The following schedule reflects the parties' conflicting computations herein of Best Life's life insurance company qualifying fraction under section 816: For 1991: Best Life: $1,669,727 � 2,089,513 = 79.9% Life Reserves Respondent: $1,669,727 � 4,755,844 = 35.1% Life Reserves For 1992: Best Life: $2,089,797 � 2,532,058 = 82.5% Life Reserves Respondent: $2,089,797 � 5,026,179 = 41.6% Life ReservesPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011