Commissioner of Internal Revenue v. Oregon Mut. Life Ins.

This is a proceeding to review a decision of the Board of Tax Appeals.

The taxpayer is a mutual life insurance company organized under the laws of Oregon. The question presented is whether its reserves for permanent and total disability benefits, maintained as against disability provisions of its combined life, health, and accident policies, are “reserve funds required by law”, within ,the meaning of § 203(a) (2) of the Revenue Acts of 1932 and 1934, 26 U.S.C.A.Int.Rev. Acts, pages 547, 730, permitting a deduction from gross income of a percentage of the mean of such funds held at the beginning and end of the taxable year.

The taxpayer writes annuity contracts and ordinary life insurance policies, including policies providing for double indemnity. It writes also policies of combined life, health, and accident insurance. It issues no separate disability contracts. All policies are based on the level premium plan.

In the tax years in question (1933 and 1934) the taxpayer’s outstanding policies were about equally divided between disability contracts ■ (combined life, health, *469 and accident), and those providing for no disability benefits. In addition to the payment of death…