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be based on the actual loss experience of the insurance company.
See Maryland Deposit Ins. Fund Corp. v. Commissioner, 88 T.C.
1050, 1060 (1987); Hospital Corp. of Am. v. Commissioner, T.C.
Memo. 1997-482.
Whether the taxpayer’s estimate of unpaid losses is fair
and reasonable is essentially a valuation issue and thus a
question of fact. See Hanover Ins. Co. v. Commissioner, 69 T.C.
at 270. The burden of proof is on the taxpayer to substantiate
its claimed deduction. See Rule 142(a); Welch v. Helvering, 290
U.S. 111, 115 (1933); Time Ins. Co. v. Commissioner, 86 T.C.
298, 313-314 (1986).
II. The Parties’ Positions
Petitioner asserts that its case reserves were established
by evaluating the facts of each claim, that its adverse
development reserves were reasonable given the inherent
uncertainty of its case reserve determinations, that its unpaid
loss reserves were approved by knowledgeable persons including
its expert witness, and that respondent's determination,
including the analysis of his expert, is wholly unsupported.
Petitioner argues that factual similarities between the instant
case and Utah Med. Ins. Association v. Commissioner, T.C. Memo.
1998-458, favor its position.
Respondent argues that petitioner’s unpaid loss reserves
were not fair and reasonable as they did not represent
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