The tax reform act of 1986 preserved the tax advantage of annuities but curtailed deductions for iras. allowed whole life insurance policies to be sold. identified annuities to be the same as certificates of deposit. allowed annuities to be purchased for individual retirement accounts. made all annuities tax free.

The following legal claims exist for m. finger co. identify the accounting treatment for each claim as either (a) a liability that is recorded or (b) an item described in notes to its financial statements. 1. m. finger (defendant) estimates that a pending lawsuit could result in damages of $1,250,000; it is reasonably possible that the plaintiff will win the case. an item described in notes to its financial statements. a liability that is recorded. 2. m. finger faces a probable loss on a pending lawsuit; the amount is not reasonably estimable. a liability that is recorded. an item described in notes to its financial statements. 3. m. finger estimates damages in a case at $3,500,000 with a high probability of losing the case. an item described in notes to its financial statements. a liability that is recorded. the amount that m. finger co. should record in its accounting records related to these suits is: