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Ins. Co. v. Commissioner, 89 F.2d 186, 187 (9th Cir. 1937)
(“While the amount of a reserve set up in the [annual statement]
exhibit might coincide with the amount of ‘losses incurred’ as
computed according to the statute * * *, the mere fact that the
reserve is designated for ‘losses incurred’ does not establish
that the amount of such reserve is the amount of ‘losses
incurred’ within the meaning of the federal statute.”), affg. 33
B.T.A. 501 (1935); Hanover Ins. Co. v. Commissioner, 65 T.C. at
719.13
13 Petitioner cites various cases to support its contention
that the Code requires conformity between the estimates of unpaid
losses shown on its annual statement and on its tax return. As
this Court has previously stated in rejecting similar arguments,
“the cited cases which held the annual statement to be conclusive
did not involve the reasonableness of the estimated figures
appearing on such statement, but rather the format or methodology
of such statement”. Hanover Ins. Co. v. Commissioner, 65 T.C.
715, 719 (1976). For instance, N.H. Fire Ins. Co. v.
Commissioner, 2 T.C. 708 (1943), cited by petitioner, addressed
the issue of whether certain reinsurance transactions should be
taken into account, and Bituminous Cas. Corp. v. Commissioner, 57
T.C. 58 (1971), addressed the issue of whether the taxpayer
correctly deducted reserves for policyholder dividends, in
accordance with annual statement methodology. Similarly, in
Sears, Roebuck & Co. v. Commissioner, 972 F.2d 858 (7th Cir.
1992), affg. in part and revg. in part 96 T.C. 61 (1991), the
Court of Appeals for the Seventh Circuit held that the taxpayer
was entitled to rely upon the annual statement method of
accounting for losses on certain mortgage loans. The Court of
Appeals suggested, however, that the precise figures shown on the
annual statement were not conclusive, stating that on remand the
Tax Court was free to consider the Commissioner’s argument that
the taxpayer’s returns for the years in issue “did not use a
proper case-based method of approximating its loss reserves.”
Id. at 868.
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