-21-
OPINION
I. Applicable Law
Petitioner, as a mutual property and casualty insurance
company, must compute its taxable income under section 832. See
sec. 831. Taxable income equals gross income less allowable
deductions. See sec. 832(a). Gross income includes amounts
earned from investment and underwriting income, “computed on the
basis of the underwriting and investment exhibit of the annual
statement approved by the National Association of Insurance
Commissioners”. Sec. 832(b)(1)(A). Underwriting income means
“the premiums earned on insurance contracts during the taxable
year less losses incurred and expenses incurred.” Sec.
832(b)(3). Insurance companies are also allowed various
deductions under section 832(c), including a deduction for
“losses incurred”, as defined in section 832(b)(5). Sec.
832(c)(4).18
“Losses incurred” generally means (with qualifications
inapplicable here) losses paid (net of salvage and reinsurance
recovered) on insurance contracts during the year plus any
increment from the preceding year in discounted “unpaid losses”,
less any increment from the preceding year in estimated
18 Although such a deduction would appear potentially
duplicative of losses incurred taken into account in determining
underwriting income under sec. 832(b)(3), the statute
specifically prohibits the same item from being deducted more
than once. See sec. 832(d).
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