U.S. Court of Appeals for the Second Circuit
Policyholder Dividends — All-events Test
New York Life Ins. Co. v. United States
Judges Jacobs, Carney and Gleeson
Background: The plaintiff appealed from an order dismissing its complaint. The plaintiff alleged that the Internal Revenue Service wrongfully denied it certain federal income tax deductions. The Internal Revenue Code Section 808 permits a deduction for policyholder dividends paid or accrued during the taxable year. The plaintiff claimed deductions from 1990 through 1995 for amounts it projected it would pay.
Ruling: The Second Circuit affirmed. The court held that the “all-events” test governed, which required the plaintiff to establish that the deductions may be taken in a particular tax year if all of the events occurred that establish the fact of the liability in that particular year. The plaintiff failed to plausibly claim that the all-events test was satisfied.
Arthur L. Bailey of Steptoe & Johnson for the plaintiff-appellant; Michael J. Byars, United States attorney, for the defendant-appellee