Second Circuit affirms district court decision that life insurance policyholder dividend deductions do not meet ‘all-events’ test

Insurance Tax Bulletin

In New York Life Insurance Co. v. United States, No. 11-2394 (August 1, 2013), the Second Circuit Court of Appeals affirmed a district court’s decision that deductions for policyholder dividends did not satisfy the ‘all-events’ test under the principles of Section 461. The taxpayer, New York Life Insurance Company, deducted two types of policyholder dividends: (1) an annual dividend mandated by state law that was ‘credited’ but not paid until the policy’s anniversary date; and (2) a voluntary termination dividend that was calculated and ‘accrued’ but not paid until death, maturity, or surrender. The court found that neither type of policyholder dividend deduction met the ‘all-events’ test.

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