Minnesota Lawyers Mutual Insurance Company and Subsidiaries - Page 24

            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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