With regard to the main issue only, petitioner concedes that the term "gross amount of premiums" under section 809(c)(1) includes the gross amount of deferred premiums, i.e., the net valuation premium plus loading. Petitioner contends that it is entitled1974 U.S. Tax Ct. LEXIS 7">*21 to deduct, under section 809(d)(12), accrued commissions on deferred premiums in determining gain from operations for taxable years ending December 31, 1961, and December 31, 1963. ⁴ Respondent contends that petitioner is not entitled to deductions for commissions on deferred premiums on either of two grounds as follows: (1) The commissions on deferred premiums have not accrued as of the end of each taxable year under section 461, or (2) the deduction for commissions on deferred premiums is in fact a deduction for loading and therefore not deductible under Jefferson Standard Life Insurance Co. v. United States, 408 F.2d 842">408 F.2d 842 (C.A. 4, 1969), certiorari 63 T.C. 364">*371 denied 396 U.S. 828">396 U.S. 828 (1969); and Franklin Life Insurance Co. v. United States, 399 F.2d 757">399 F.2d 757 (C.A. 7, 1968).

Section 818⁵1974 U.S. Tax Ct. LEXIS 7">*23 provides that generally all computations entering into the determination1974 U.S. Tax Ct. LEXIS 7">*22 of taxes for life insurance companies shall be made on an accrual method of accounting. Section 461(a)⁶ provides that a deduction shall be allowed in the proper taxable year under the method of accounting used in computing taxable income. Section 1.461-1(a)(2), Income Tax Regs., sets forth the general rule for determining the proper year for deduction by an accrual method taxpayer as follows:

Under an accrual method of accounting, an expense is deductible for the taxable year in which all the events have occurred which determine the fact of the liability and the amount thereof can be determined with reasonable accuracy. * * * While no accrual shall be made in any case in which all of the events have not occurred which fix the liability, the fact that the exact amount of the liability which has been incurred cannot be determined will not prevent the accrual within the taxable year of such part thereof as can be computed with reasonable accuracy. * * * [Emphasis added.]

Petitioner does not contend that commissions on deferred premiums have accrued as of the end of each taxable year under the requirements of section 461, nor did it present any evidence at the trial to indicate that they had so accrued. Petitioner argues that the "all events test" of section 1.461-1(a)(2) is not applicable in determining the deductibility of commissions on deferred premiums for life insurance companies; rather, petitioner suggests that an approach that matches related items of income and deductions should be applied. Four circuit Courts of Appeals have held that gross deferred premiums are required to be included in income under section 809(c)(1) for Federal tax purposes even though the life insurance companies had no legal 63 T.C. 364">*372 right to collect such premiums from the insured individuals. Great Commonwealth Life Insurance Co. v. United States, 491 F.2d 1091974 U.S. Tax Ct. LEXIS 7">*24 (C.A. 5, 1974); Western & Southern Life Insurance Co. v. Commissioner, 460 F.2d 8 (C.A. 6, 1972), reversing 55 T.C. 1036">55 T.C. 1036 (1971), certiorari denied 409 U.S. 1063">409 U.S. 1063 (1972); Jefferson Standard Life Insurance Co. v. United States, 408 F.2d 842">408 F.2d 842 (C.A. 4, 1969), certiorari denied 396 U.S. 828">396 U.S. 828 (1969); Franklin Life Insurance Co. v. United States, 399 F.2d 757">399 F.2d 757 (C.A. 7, 1968), certiorari denied 393 U.S. 1118">393 U.S. 1118 (1969). The position of these courts has also recently been adopted by this Court in Bankers Union Life Insurance Co., 62 T.C. 661">62 T.C. 661 (1974). Petitioner argues that since the fact of liability is ignored for purposes of accruing income from deferred premiums, the fact of liability for purposes of accruing deductions for commissions on deferred premiums should also be ignored.

In Great Commonwealth Life Insurance Co. v. United States, supra, the Fifth Circuit held that an insurance company should be entitled to deduct commissions on1974 U.S. Tax Ct. LEXIS 7">*25 deferred premiums when the premiums giving rise to such commissions are required to be included in income. The Fifth Circuit conceded that such expenses were not properly accruable under section 461. It based its holding on a "need to avoid undue distortion of income." Petitioner also cites the case of United Life & Accident Insurance Co. v. United States, 329 F. Supp. 765">329 F. Supp. 765 (D. N.H. 1971), as support for its position. In that case, the District Court held that once collection of deferred premiums is assumed for inclusion in income purposes, it must also be assumed for purposes of deducting expenses applicable to the deferred premiums. The reasoning of the court is shown as follows:

The government contends, and three Circuit Courts of Appeals and I agree, that deferred and uncollected premiums must be reported as income under the Act even though the company has absolutely no right to collect them. Once it is assumed that deferred and uncollected premiums have accrued, then the expense portion of those premiums has also of necessity accrued. If collection is assumed for income purposes, then it should be assumed for expense purposes. Consistency1974 U.S. Tax Ct. LEXIS 7">*26 requires that the same assumption that is applied to income from deferred and uncollected premiums be applied to the expenses associated with those premiums.

Since appeal in this case lies to the Eighth Circuit, which has not passed on this issue, we are not required to follow the decision of the Fifth Circuit Court of Appeals. Nathan Cummings, 61 T.C. 1">61 T.C. 163 T.C. 364">*373 (1973); Jack E. Golsen, 54 T.C. 742">54 T.C. 742 (1970), affd. 445 F.2d 985 (C.A. 10, 1971), certiorari denied 404 U.S. 940">404 U.S. 940 (1971). The Eighth Circuit has stated, however, that when uniformity of the circuits is important, the decision of another Court of Appeals should be followed unless demonstratably erroneous or unsound. Goodenow v. Commissioner, 238 F.2d 20 (C.A. 8, 1956), reversing 25 T.C. 1">25 T.C. 1 (1955).

For the reasons stated below, we follow the position of the Fifth Circuit in the Great Commonwealth case and hold that petitioner is entitled to deduct accrued commissions applicable to deferred and uncollected premiums. Petitioner is required to accrue1974 U.S. Tax Ct. LEXIS 7">*27 deferred and unpaid premiums even though it has no right to receive them and, as all parties agree, normal tax accrual rules would not require their inclusion. This position is based primarily on the assumption that on each policy anniversary date the full annual gross premium had been received. Thus, for purposes of accrual of income, the contingency of no liability for payment is negated by application of the assumption of full collection of the gross premiums. Respondent now contends that petitioner is not entitled to accrue deductions for commissions applicable to such premiums because they are subject to the contingency that, if such premiums are not received, petitioner has no liability to pay the resultant commissions. This contention, however, ignores the assumption utilized to require accrual of the premium income. Once the fiction of annual receipt of premiums is accepted, it must be applied for all purposes. Upon receipt of premiums, it is clear that a liability to pay commissions arises. Assumption of receipt of premiums necessarily requires recognition of the concomitant liabilities, for the petitioner cannot receive premiums without incurring corresponding commission1974 U.S. Tax Ct. LEXIS 7">*28 expenses. Both the accrual of income and deduction of commissions are subject to the same contingency, that is, the receipt of the premiums. Respondent cannot ignore the contingency in requiring accrual of income yet assert such contingency in determining the accrual of related deductions.

Although there are no cases directly on point, we find support for this position in the following cases. W. S. Badcock Corp. v. Commissioner, 491 F.2d 1226 (C.A. 5, 1974), reversing 59 T.C. 272">59 T.C. 272 (1972); Central Cuba Sugar Co. v. Commissioner, 198 F.2d 214 (C.A. 2, 1952); Warren Co., 46 B.T.A. 897">46 B.T.A. 897 (1942), affd. 135 F.2d 679 (C.A. 5, 1943); Air-Way Electric Appliance 63 T.C. 364">*374 , 123 F.2d 20 (C.A. 6, 1941); Ohmer Register Co. v. Commissioner, 131 F.2d 682 (C.A. 6, 1942). Each of these cases involved the deductibility of sales commissions which arose from the sale of goods the income from which was required to be accrued currently. These cases held that the related1974 U.S. Tax Ct. LEXIS 7">*29 commissions were currently deductible because the income from the sale, out of which both income and commission arose, was currently accruable. In other words, these cases stand for the proposition that an item of income and its related deductions which are subject to the same fact of contingency should be treated alike for accrual purposes. In the present situation the contingency for accrual of income and deduction of commissions is the same. That is, the contingency for accrual is the collection of the deferred and uncollected premiums. Having assumed for inclusion purposes that the contingency of collection is subject to the fiction that all premiums have been collected, we cannot treat the deduction of the related expenses on the basis that the fiction of collections did not exist. In other words, the contingency with regard to the collection of income and the contingency with regard to the deduction of expenses related thereto are negated by the acceptance of the assumption that all premiums have been collected on an annual basis.

With regard to the question of whether petitioner's deductions were determined with reasonable accuracy, we recognize that petitioner cannot 1974 U.S. Tax Ct. LEXIS 7">*30 determine the precise amount of commissions to be paid because it does not know the precise amount of deferred premiums which will be collected. Since, however, petitioner is required to include the entire amount of deferred premiums in income, it is only reasonable to permit petitioner deductions for commissions which it would pay on such deferred premiums. In the present case, petitioner determined the amount of accrued commissions based upon the figures which were known to it, and adjusted downward to reflect a reasonable estimate for unearned commissions. As noted hereinbefore, approximately 90 percent of petitioner's claimed accrued commissions on gross deferred premiums in its 1960 to 1963, inclusive, income tax returns were in fact paid in the year following accrual. We hold that petitioner has, under these circumstances, determined the deductible amounts with reasonable accuracy.

Finally, we find no merit in respondent's argument that commissions on deferred premiums are in fact deductions for 63 T.C. 364">*375 loading, the deduction of which has been disallowed in Jefferson Standard Life Insurance Co. v. United States, 408 F.2d 842">408 F.2d 842 (C.A. 4, 1969), 1974 U.S. Tax Ct. LEXIS 7">*31 certiorari denied 396 U.S. 828">396 U.S. 828 (1969), and Franklin Life Insurance Co. v. United States, 399 F.2d 757">399 F.2d 757 (C.A. 7, 1968). The determination of loading involves the consideration of estimated administration, management and operating expenses, various contingencies and anticipated profits, the valuations of which depend upon the independent judgment of each life insurance company. In this case, petitioner did not claim deductions for administrative or management expenses nor for any contingencies or anticipated profits. The only connection between petitioner's deduction for accrued commissions on deferred and uncollected premiums and loading is that one of the factors considered in determining loading is commission expenses.

Having decided that petitioner is entitled to deduction for accrued commissions on deferred premiums, we do not reach petitioner's alternative arguments regarding deductibility of loading or exclusion of the loading factor portion of deferred premiums from income.

Decision will be entered under Rule 155.