State Farm Mutual Automobile Insurance Co. & Subsidiaries v. Commissioner
United States Tax Court
P provided automobile liability insurance. P was found by the Supreme Court of Utah to be liable for punitive damages related to its claims processing on this liability coverage. P reflected the amount of the punitive damage award as a "loss incurred" within the meaning of sec. 832(b)(5), I.R.C., entitling it to increase its insurance loss reserve, as shown on its annual statement for insurance regulatory purposes.
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P provided automobile liability insurance. P was found by the Supreme Court of Utah to be liable for punitive damages related to its claims processing on this liability coverage. P reflected the amount of the punitive damage award as a "loss incurred" within the meaning of sec. 832(b)(5), I.R.C., entitling it to increase its insurance loss reserve, as shown on its annual statement for insurance regulatory purposes. R challenges this treatment for several reasons including that the punitive damage award was extracontractual to the insurance coverage P provided. Held: P may not include the…
1Opinion of the Court
OPINION
Goeke, Judge:
Respondent determined deficiencies in petitioner’s income tax for the taxable years 1996 through 1999. Petitioner raised seven issues in its petition, six of which have been resolved. This Opinion addresses solely whether punitive damages and related costs of $202 million are includable in losses incurred under section 832(b)(5) 1 for taxable years 2001 and 2002. For the reasons stated herein, we find that the $202 million is not properly included in losses incurred for Federal income tax purposes.
Background
Some of the facts have been stipulated and are so found. The…
2Cases cited13 opinions
- Welch v. HelveringSupreme Court of the United States · 1933
- New Colonial Ice Co. v. HelveringSupreme Court of the United States · 1934
- State Farm Mutual Automobile Insurance v. CampbellSupreme Court of the United States · 2003
- Jack E. Golsen and Sylvia H. Golsen v. Commissioner of Internal RevenueCourt of Appeals for the Tenth Circuit · 1971
- Indopco, Inc. v. CommissionerSupreme Court of the United States · 1992
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3Cited by1 opinion
- State Farm Mutual Automobile Insurance v. CommissionerCourt of Appeals for the Seventh Circuit · 2012