-22-
recoverable salvage and reinsurance. Sec. 832(b)(5)(A).19
“Unpaid losses” generally means “unpaid losses shown in the
annual statement filed by the taxpayer for the year ending with
or within the taxable year of the taxpayer.” Sec. 846(b)(1).
Unpaid losses include any unpaid loss adjustment expenses. See
sec. 832(b)(6).
The relevant regulations state:
(a)(5) In computing “losses incurred” the determination of
unpaid losses at the close of each year must represent
actual unpaid losses as nearly as it is possible to
ascertain them.
(b) Losses incurred. Every insurance company to which
this section applies must be prepared to establish to the
satisfaction of the district director that the part of the
19 Sec. 832(b)(5)(A) provides in relevant part:
In general.--The term “losses incurred” means losses
incurred during the taxable year on insurance contracts
computed as follows:
(i) To losses paid during the taxable year, deduct
salvage and reinsurance recovered during the taxable
year.
(ii) To the result so obtained, add all unpaid
losses on life insurance contracts plus all discounted
unpaid losses (as defined in section 846) outstanding
at the end of the taxable year and deduct all unpaid
losses on life insurance contracts plus all discounted
unpaid losses outstanding at the end of the preceding
taxable year.
(iii) To the results so obtained, add estimated
salvage and reinsurance recoverable as of the end of
the preceding taxable year and deduct estimated salvage
and reinsurance recoverable as of the end of the
taxable year.
Page: Previous 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 NextLast modified: May 25, 2011