- 22 -
In Hanover, 65 T.C. at 719, this Court concluded that the
applicable regulations were deemed to have received congressional
approval and acquired the force of law by virtue of having been
“long continued without substantial change, applying to unamended
or substantially reenacted statutes”. This tacit congressional
approval was made overt when, as part of the Tax Reform Act of
1986, Pub. L. 99-514, sec. 1023(c), 100 Stat. 2085, 2399,
Congress added section 846 (requiring that unpaid losses be
discounted to reflect the time value of money for claims that
would not be paid until future years). In explaining these
changes, the conference report accompanying this legislation
described prior law as follows:
The amount of the deduction for losses incurred
must be reasonable. See Reg. sec. 1.832-4(b) and
Hanover Insurance Co. v. Commissioner, 598 F.2d 1121
(1st Cir. 1979), cert. denied, 444 U.S. 915. Thus,
under present law, the Internal Revenue Service may
review, and, if appropriate, adjust the amount of the
deduction for unpaid losses and unpaid loss adjustment
expenses. [H. Conf. Rept. 99-841 (Vol. II), at II-357
(1986), 1986-3 C.B. (Vol. 4) 1, 357.]
Petitioner argues that various technical aspects of certain
1986 and 1990 Code amendments relating to P&C companies
“continued, and in some ways strengthened, deference to the
Annual Statement”. Without a protracted discussion of
petitioner’s highly technical arguments in this regard, suffice
it to say that we have reviewed them carefully and find them
unpersuasive. Even if we were to assume, arguendo, that Congress
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