Page:United States Statutes at Large Volume 56 Part 1.djvu/896

 PUBLIC LAWS-CH. 619-OCT. 21, 1942 "(c) OTHER DEFINITIONS. -In the case of a life insurance com- pany- "(1) GRoss INCOME. -T he term 'gross income' means the gross amount of income received during the taxable year from interest, dividends, and rents. "(2) LIFE INSURANCE RESERVES. -The term 'life insurance reserves' means amounts which are computed or estimated on the basis of recognized mortality or morbidity tables and assumed rates of interest, and which are set aside to mature or liquidate, either by payment or reinsurance, future unaccrued claims aris- ing from life insurance, annuity, and noncancellable health and accident insurance contracts (including life insurance or annuity contracts combined with noncancellable health and accident insurance) involving, at the time with respect to which the reserve is computed, life, health, or accident contingencies. Such life insurance reserves, except in the case of 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 and except as hereinafter provided in the case of assessment life insurance, must also be required by law. In the case of an assessment life insurance company or association the term 'life insurance reserves' includes sums actually deposited by such company 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 or association, or bylaws approved by State Insurance Commissioner of such 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. "(3) ADJUSTED RESERVES. - The term 'adjusted reserves' means life insurance reserves plus 7 per centum of that portion of such reserves as are computed on a preliminary term basis. "(4) RESERVE EARNINGS RATE. -The term 'reserve earnings rate' means a rate computed by adding 2.1125 per centum (65 per centum of 31/4 per centum) to 35 per centum of the average rate of interest assumed in computing life insurance reserves. Such average rate shall be calculated by multiplying each assumed rate of interest by the means of the amounts of the adjusted reserves computed at that rate at the beginning and end of the taxable year and dividing the sum of the products by the mean of the total adjusted reserves at the beginning and end of the taxable year. "(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. " (6) INTEREST PAID.-T he term 'interest paid' means- "(A) All interest paid within the taxable year on indebt- edness, except on indebtedness incurred or continued to pur- chase 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 chapter, and "(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 868 [56 STAT.

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