Trans City Life Ins. Co. v. Commissioner
United States Tax Court
P is an insurance company authorized to sell disability and life insurance within the State of Arizona. P's primary and predominant business activity is writing credit life and disability insurance policies. During the subject years, P and G, an unrelated entity, entered into two retrocession (reinsurance) agreements for valid and substantial business reasons.
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P is an insurance company authorized to sell disability and life insurance within the State of Arizona. P's primary and predominant business activity is writing credit life and disability insurance policies. During the subject years, P and G, an unrelated entity, entered into two retrocession (reinsurance) agreements for valid and substantial business reasons. Under the terms of each agreement, G retroceded its position on reinsurance to P, and P agreed to pay G a $ 1 million ceding commission. The agreements helped P qualify as a life insurance company under sec. 816, I.R.C., which, in turn,…
1Opinion of the Court
CONTENTS
Page
FINDINGS OF FACT. 277
1. General Facts . 277
a. Petitioner . 277
b. Notices of Deficiency .1. 278
2. Reinsurance in General. 278
a. Overview . 278
b. Experience Refund Provisions. 280
c. Risk Transfer and Risk Charges . 281
d. Termination . 283
3. The 1988 and 1989 Retrocession Agreements . 283
a. Overview . 283
b. Purpose of the Agreements. 286
4. 1988 Agreement . 287
a. Original Agreement. 287
b. First Amendment/Trust Account . 288
c. Underlying Business . 289
d. Ceding Commission and Risk Charge . 289
e. Right To Withhold . 290
f. Recapture . 291
g. Termination . 291
5. 1989 Agreement . 292
a. In…
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