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Case Basics
Docket No. 
Atlantic Mutual Ins. Co.
(Argued the cause for the respondent)
(Argued the cause for the petitioner)
Facts of the Case 

The Internal Revenue Code allowed property and casualty insurers to fully deduct "loss reserves," or unpaid losses. The Tax Reform Act of 1986 altered the deduction formula. Under the Act, increases in loss reserves that constitute "reserve strengthening," or additions to the loss reserve, were excepted from a one time tax benefit because it would result in a tax deficiency. Treasury regulation and the Commissioner of Internal Revenue interpreted the law to say that any increase in loss reserves constituted reserve strengthening. The Commissioner then determined Atlantic Mutual Insurance Company had engaged in reserve strengthening. The Tax Court disagreed with the government's interpretation. It held reserve strengthening referred only to increases resulting from computational methods. The Court of Appeals reversed the decision. It held reserve strengthening to encompass any increase in loss reserves.


Is the government's interpretation of reserve strengthening correct in determining property and casualty insurers' liability?

Decision: 9 votes for IRS, 0 vote(s) against
Legal provision: Internal Revenue Code

Yes. In a unanimous decision, announced by Justice Antonin Scalia, the Court ruled that the IRS interpretation of reserve strengthening seemed "reasonable accommodation." It was fair and unabusive. Furthermore, the language of the provision was broad enough to embrace all increases in the reserves.

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ATLANTIC MUTUAL INS. CO. v. IRS. The Oyez Project at IIT Chicago-Kent College of Law. 26 August 2015. <>.
ATLANTIC MUTUAL INS. CO. v. IRS, The Oyez Project at IIT Chicago-Kent College of Law, (last visited August 26, 2015).
"ATLANTIC MUTUAL INS. CO. v. IRS," The Oyez Project at IIT Chicago-Kent College of Law, accessed August 26, 2015,