Solution-Policy holders to fund policy payout obligations

Policy holders to fund policy payout obligations

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Reference no: EM133227526

BigCo is a calendar year accrual method taxpayer. It is an insurance company. It receives premiums from policy holders to fund policy payout obligations. When it earns excess income, it distributes that income to policyholders as rebates.

In December of Year 1, it announced that it would pay rebates to some policyholders in February of Year 2. At the time of the announcement, the policyholders were not specifically identified, nor was the final amount of rebates to be paid known, but a guaranteed minimum amount of $1 million was specified.

Provide arguments for and against deducting the rebates in Year 1. Provide citations to authority as you go.

Reference no: EM133227526

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Policy holders to fund policy payout obligations

Reference no: EM133227526

Reference no: EM133227526

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