State Farm Can't Deduct Punitive Damages Reserve: 7th Circ.

Law360, New York (August 31, 2012, 7:05 PM EDT) -- The Seventh Circuit on Friday partially upheld a U.S. Tax Court ruling against State Farm Insurance Co. over its inclusion of more than $145 million in punitive damages in an annual loss reserve statement, saying such damages are deductible only when paid.

The insurer had appealed a U.S. Tax Court ruling that determined State Farm should not have included a $202 million award of compensatory and punitive damages for bad faith in its handling of an automobile fatality coverage dispute when calculating insurance loss reserves on...
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