Taxable Years Taxable Years Taxable Years Beginning in 1941 sociation with State or Territorial sociation with State or Territorial officers pursuant to law as guaranty officers pursuant to law as guaranty or reserve funds, and any funds or reserve funds, and any funds maintained under the charter or maintained under the charter or articles of incorporation or associa- articles of incorporation or association, or bylaws approved by State tion, or bylaws approved by State Insurance Commissioner of such Insurance Commissioner of such company or association exclusively company or association exclusively for the payment of claims arising for the payment of claims arising under certificates of membership or under certificates of membership or policies issued upon the assessment policies issued upon the assessment plan and not subject to any other plan and not subject to any other Sec. 201. (c) (3) Adjusted re- Sec. 201. (c) (3) Adjusted reserves. The term "adjusted re- serves.-The term "adjusted reserves" means life insurance re- serves" means life insurance reserves serves plus 7 per centum of that plus 7 per centum of that portion portion of such reserves as are of such reserves as are computed on computed on a preliminary term a preliminary term basis. basis. Sec. 201. (c) (4) Reserve earn- Sec. 201. (c) (4) Reserve earnings rate. The term "reserve earn- ings rate.-The term "reserve earnings rate" means a rate computed ings rate" means a rate computed by adding 2.1125 per centum (65 by adding 2.1125 per centum (65 per centum of 34 per centum) to per centum of 34 per centum) to 35 per centum of the average rate 35 per centum of the average rate of interest assumed in computing of interest assumed in computing life insurance reserves. Such av-life insurance reserves. Such average rate shall be calculated by erage rate shall be calculated by multiplying each assumed rate of multiplying each assumed rate of interest by the means of the interest by the means of the amounts of the adjusted reserves amounts of the adjusted reserves computed at that rate at the begin- computed at that rate at the beginning and end of the taxable yearning and end of the taxable year and dividing the sum of the prod- and dividing the sum of the products by the mean of the total adjusted reserves at the beginning and end of the taxable year. Sec. 201. (c) (5) Reserve for deferred dividends.-The term "reserve for deferred dividends" means sums held at the end of the taxable year as a reserve for dividends (other than dividends payable during the year following the taxable year) the payment of which is deferred for a period of not less than five years from the date of the policy contract. Sec. 201. (c) (6) Interest paid. -The term "interest paid" means ucts by the mean of the total ad- Sec. 201. (c) (5) Reserve for de- Sec. 201. (c) (6) Interest paid.— (A) All interest paid within the (A) All interest paid within the taxable year on indebtedness, ex- taxable year on indebtedness, except cept on indebtedness incurred or on indebtedness incurred or concontinued to purchase or carry ob- tinued to purchase or carry obligaligations (other than obligations of tions (other than obligations of the the United States issued after United States issued after SeptemSeptember 24, 1917, and originally ber 24, 1917, and originally subsubscribed for by the taxpayer) the scribed for by the taxpayer) the interest upon which is wholly ex- interest upon which is wholly ex Taxable Years Taxable Years Taxable Years empt from chapter, and taxation under this empt from taxation under this (B) All amounts in the nature of interest, whether or not guaranteed, paid within the taxable year on insurance or annuity contracts (or contracts arising out of insurance or annuity contracts) which do not involve, at the time of payment, life, health, or accident contingencies. Sec. 201. (c) (7) Net Income.— The term "net income" means the gross income less (A) Tax-free Interest.-The amount of interest received during the taxable year which under section 22 (b) (4) is excluded from gross income; (B) All amounts in the nature of interest, whether or not guaranteed, paid within the taxable year on insurance or annuity contracts (or contracts arising out of insurance or annuity contracts) which do not involve, at the time of payment, life, health, or accident contingencies. Sec. 201. (c) (7) Net Income.— The term "net income" means the gross income less (A) Tax-free Sec. 203. Net income of life insurance companies. Sec. 203. (a) General rule.—In the case of a life insurance company the term "net income" means the gross income less Interest.-The amount of interest received during Sec. 203. (a) (1) Tax-free interthe taxable year which under sec-est.-The amount of interest retion 22 (b) (4) is excluded from ceived during the taxable year gross income; which under section 22 (b) (4) is excluded from gross income; shall not exceed one-fourth of 1 per centum of the book value of the mean of the invested assets held at the beginning and end of the taxable year; (B) Investment Expenses.-In- (B) Investment Expenses.-In- Sec. 203. (a) (4) Investment vestment expenses paid during the vestment expenses paid during the expenses.-Investment expenses taxable year. If any general ex-taxable year. If any general ex-paid during the taxable year: Propenses are in part assigned to or penses are in part assigned to or in- vided, That if any general expenses included in the investment ex- cluded in the investment expenses, are in part assigned to or included penses, the total deduction under the total deduction under this sub-in the investment expenses, the tothis subparagraph shall not exceed paragraph shall not exceed one- tal deduction under this paragraph one-fourth of 1 per centum of the fourth of 1 per centum of the mean mean of the book value of the in- of the book value of the invested vested assets held at the beginning assets held at the beginning and end and end of the taxable year plus of the taxable year plus one-fourth one-fourth of the amount by which of the amount by which net income net income computed without any computed without any deduction for deduction for investment expenses investment expenses allowed by this Sec. 203. (a) (2) Reserve funds. allowed by this subparagraph, or subparagraph, or for tax-free inter--An amount equal to 4 per cenest allowed by subparagraph (A), tum of the mean of the reserve exceeds 334 per centum of the book funds required by law and held at value of the mean of the invested the beginning and end of the taxassets held at the beginning and end of the taxable year; for tax-free interest allowed by subparagraph (A), exceeds 334 per centum of the book value of the mean of the invested assets held at the beginning and end of the taxable year; able year, except that in the case of any such reserve fund which is computed at a lower interest assumption rate, the rate of 334 per centum shall be substituted for 4 per centum. Life insurance companies issuing policies covering life, health, and accident insurance combined in one policy issued on the weekly premium payment plan, continuing for life and not subject to cancellation, shall be allowed, in addition to the above, a deduction of 334 per centum of the mean of such reserve funds (not required by law) held at the beginning and end of the taxable year, as the Commissioner finds to be necessary for the protection of the holders of such policies only; Sec. 203. (a) (3) Reserve for dividends.—An amount equal to 2 per centum of any sums held at the Taxable Years Taxable Years Taxable Years Sec. 203. Net income of life insurance companies. Sec. 203. Net income of life insurance companies. Sec. 203. (a) General rule.-In Sec. 203. (a) General rule.-In the case of a life insurance com- the case of a life insurance company the term "net income" pany the term "net income" means the gross income less- means the gross income less Sec. 203. Net income of life insurance companies. Sec. 203. (a) (1) Tax-free inter- Sec. 203. (a) (1) Tax-free interest. The amount of interest re-est.-The amount of interest re- est. ceived during the taxable year ceived during the taxable year which under section 22 (b) (4) is which under section 22 (b) (4) is excluded from gross income; excluded from gross income; Sec. 203. (a) (4) Investment Sec. 203. (a) (4) Investment expenses. Investment expenses expenses.-Investment expenses paid during the taxable year: Pro- paid during the taxable year: Provided, That if any general expenses vided, That if any general expenses are in part assigned to or included are in part assigned to or included in the investment expenses, the to- in the investment expenses, the total tal deduction under this paragraph deduction under this paragraph shall not exceed one-fourth of 1 per centum of the book value of the mean of the invested assets held at the beginning and end of the taxable year; shall not exceed one-fourth of 1 per Sec. 203. (a) (2) Reserve funds. Sec. 203. (a) (2) Reserve funds. -An amount equal to 4 per cen--An amount equal to 4 per centum of the mean of the reserve tum of the mean of the reserve funds required by law and held at funds required by law and held at the beginning and end of the tax- the beginning and end of the taxable year, except that in the case able year, except that in the case of any such reserve fund which is of any such reserve fund which is computed at a lower interest as- computed at a lower interest assumption rate, the rate of 334 per sumption rate, the rate of 334 per centum shall be substituted for 4 centum shall be substituted for 4 per centum. Life insurance com- per centum. Life insurance companies issuing policies covering panies issuing policies covering life, health, and accident insurance life, health, and accident insurance combined in one policy issued on combined in one policy issued on the weekly premium payment plan, the weekly premium payment plan, continuing for life and not sub- continuing for life and not subject to cancellation, shall be al- ject to cancellation, shall be allowed, in addition to the above, a lowed, in addition to the above, a deduction of 334 per centum of the deduction of 334 per centum of the mean of such reserve funds (not mean of such reserve funds (not required by law) held at the be- required by law) held at the beginning and end of the taxable ginning and end of the taxable year, year, as the Commissioner finds to as the Commissioner finds to be be necessary for the protection of necessary for the protection of the the holders of such policies only; holders of such policies only; Sec. 203. (a) (3) Reserve for Sec. 203. (a) (3) Reserve for dividends. An amount equal to 2 dividends.-An amount equal to 2 per centum of any sums held at the per centum of any sums held at the Sec. 203. (a) General rule. Sec. 203. (a) (1) Tax-free inter See p. 304, Eighth Edition. Sec. 203. (a) (4) Investment expenses. See p. 306, Eighth Edition. Sec. 203. (a) (2) Reserve funds. Sec. 203. (a) (3) Reserve for dividends. See p. 306, Eighth Edition. (C) Real Estate Expenses. Taxable Years end of the taxable year as a reserve for dividends (other than dividends payable during the year following the taxable year) the payment of which is deferred for a period of not less than five years from the date of the policy contract; (C) Real Estate Expenses.Sec. 203. (a) (5) Real estate exTaxes and other expenses paid dur- Taxes and other expenses paid dur-penses.-Taxes and other expenses ing the taxable year exclusively ing the taxable year exclusively paid during the taxable year excluupon or with respect to the real upon or with respect to the real sively upon or with respect to the estate owned by the company, not estate owned by the company, not real estate owned by the company, including taxes assessed against lo- including taxes assessed against lo- not including taxes assessed against cal benefits of a kind tending to cal benefits of a kind tending to local benefits of a kind tending to increase the value of the property increase the value of the property increase the value of the property assessed, and not including any assessed, and not including any assessed, and not including any amount paid out for new buildings, amount paid out for new buildings, amount paid out for new buildings, or for permanent improvements or or for permanent improvements or or for permanent improvements or betterments made to increase the betterments made to increase the betterments made to increase the value of any property. The deduc- value of any property. The deduc- value of any property. The deduction allowed by this paragraph tion allowed by this paragraph shall tion allowed by this paragraph shall be allowed in the case of taxes be allowed in the case of taxes im- shall be allowed in the case of taxes imposed upon a shareholder of a posed upon a shareholder of a comimposed upon a shareholder of a company upon his interest as share-pany upon his interest as share- company upon his interest as shareholder, which are paid by the com- holder, which are paid by the com- holder, which are paid by the company without reimbursement from pany without reimbursement from pany without reimbursement from the shareholder, but in such cases the shareholder, but in such cases the shareholder, but in such cases no deduction shall be allowed the no deduction shall be allowed the no deduction shall be allowed the shareholder for the amount of such shareholder for the amount of such shareholder for the amount of such taxes; taxes; taxes; (D) Depreciation.-A reasonable (D) Depreciation.-A reasonable allowance, as provided in section 23 allowance, as provided in section 23 (1), for the exhaustion, wear and (), for the exhaustion, wear and tear of property, including a rea- tear of property, including a reasonable allowance for obsolescence. sonable allowance for obsolescence. Sec. 201. (d) Rental value of Sec. 203. (a) (6) Depreciation.A reasonable allowance, as provided in section 23 (1), for the exhaustion, wear and tear of property, including a reasonable allowance for obsolescence; and Sec. 203. (a) (7) Interest.— All interest paid within the taxable year on its indebtedness, except on indebtedness incurred or continued to purchase or carry obligations (other than obligations of the United States issued after September 24, 1917, and originally subscribed for by the taxpayer) the interest upon which is wholly exempt from taxation under this chap ter. Sec. 203. (a) (8) The amount of the net operating loss deduction provided in section 23 (s). Sec. 203 (a) (8), I. R. C., supra, added by Sec. 211 (e) (1), R. A. of 1939, approved June 29, 1939. Sec. 203. (b) Rental value of real estate. The deduction under subsection (a) (5) or (6) of this (D) of this section on account of section on account of any real esany real estate owned and occupied tate owned and occupied in whole in whole or in part by a life insur-or in part by a life insurance com Sec. 201. (d) Rental value of real estate. The deduction under real estate. The deduction under subsection (c) (7) (C) or (c) (7) subsection (c) (7) (C) or (c) (7) (D) of this section on account of any real estate owned and occupied in whole or in part by a life insur |