Page:United States Statutes at Large Volume 47 Part 1.djvu/248

 224 INCOME TAX Foreign. Gross income, l ife insurance companies. "Gross income," de- fined. "Reserve funds re- quired bylaw ." Application of. Net income. Deductions from. Tax-free interest. Ante, p. 178. Reserve funds re- quired by law. Poli cies of comb ined insurance. Weekly payment plan. Rese rves not req uir ed bylaw. Dividends from do- mest ic c orpo ratio ns. Post, p. 231. From foreign corpor- ations. Ant e, p. 208. Amount for reserv es for def erred dividends. Investment expenses. Proviso . Limitation. 72d CONGRESS. SESS. I. CH. 209 . JUNE 6, 1932 . (2) In the case of a foreign life insurance company, 133/ 4 per centum of its net income from sources within the United States. SEC. 202. GROSS INCOME OF LIFE INSURANCE COMPANIES. (a) In the case of a life insurance company the term "gross income " means the gross amount of income received during the taxable year from interest, dividends, and rents. (b) The term "reserve funds required by law" includes, in the case of assessment insurance, sums actually deposited by any co m- pany or association with State or Territorial officers pursuant to law as guaranty or reserve funds, and any funds maintained under the charter or articles of incorporation of the company or association exclusively for the payment of claims arising under certificates of membership or policies issued upon the assessment plan and not subject to any other use. SEC. 203. NET INCOME OF LIFE INSURANCE COMPANIES. (a) GENERAL R U L E .-In the case of a life insurance company the term " net income " means the gross income less- (1) TAX-FREE INTEREST .-The amount of interest received du r- ing the taxable year which under section 22(b) is exempt from the taxes imposed by this title ; (2) RESERVE FUNDS .-An amount equal to 4 per centum of the mean of the reserve funds required by law and held at the begin- ning and end of the taxable year, except that in the case of any such reserve fund which is computed at a lower interest assumption rate, the rate of 33/ 4 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 wee kly prem ium paym ent plan, co ntin uing for lif e and not subject to cancellation, shall be allowed, in addition to the above, a deduction of 33/ 4 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 ; (3) DIVIDENDS. - T he amount received as dividends (A) from a domestic corporation which is subject to taxation under this title, other than a corporation entitled to the benefits of section 251, and other than a corporation organized under the China Trade Act, 1922, or (B) from any foreign corporation when it is shown to the satisfaction of the Commissioner that more than 50 per centum of the gross income of such foreign corporation for the three-year period ending with the close of its taxable year pre- ceding the declaration of such dividends (or for such part of such period as the foreign corporation has been in existence) was derived from sources within the United States as determined under section 119 ; (4) RESERVE FOR DIVIDENDS .-An amount equal to 2 per centum of any sums held at the end of the taxable year as a reserve for dividends (other than dividends payable during the year follow- ing the taxable year) the paym ent of w hich is deferred for a period of not less than five years from the date of the policy contract ; (5) INVESTMENT EXPENSES .-In vest ment exp ense s paid dur ing the taxable year : Prov ided , That if any general expenses are in part assigned to or included in the investment expenses, the total 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 ;