Page:United States Statutes at Large Volume 68A.djvu/298

 258

INTERNAL REVENUE CODE OF 1954



(i) AMORTIZATION OF PREMIUM AND ACCRUAL OF DISCOUNT.—The

gross income, the deduction provided in subsection (g)(1), and the deduction allowed by section 242 (relating to partially tax-exempt interest) shall each be decreased to reflect the appropriate amortization of premium and increased to reflect the appropriate accrual of discount attributable to the taxable year on bonds, notes, debentures, or other evidences of indebtedness held by a life insurance company. Such amortization and accrual shall be determined— (1) in accordance with the method regularly employed by such company, if such method is reasonable, and (2) in all other cases, in accordance with regulations prescribed by the Secretary or his delegate. (j) D O U B L E DEDUCTIONS.—Nothing in this part shall permit the same item to be deducted more than once. SEC. 804. RESERVE AND OTHER POLICY LIABILITY DEDUCTION.

(a) IN GENERAL.—For purposes of this subpart, the term "reserve and other policy liability deduction" means an amount computed by multiplying the taxable income by a figure, to be determined and proclaimed by the Secretary or his delegate for each taxable year. This figure shall be based on such data with respect to life insurance companies for the preceding taxable year as the Secretary or his delegate considers representative and shall be computed in accordance with the following formula: The ratio which a numerator comprised of the aggregate of the sums of— (1) 2 percent of the reserves for deferred dividends, (2) interest paid, and (3) the product of— (A) the mean of the adjusted reserves at the beginning and end of the taxable year and (B) the reserve earnings rate, bears to a denominator comprised of the aggregate of the excess of taxable incomes (computed without any deduction for tax-free interest, partially tax-exempt interest, or dividends received) over the adjustment for certain reserves provided in section 806. (b) SURTAX COMPUTATION.—In determining the life insurance company taxable income for purposes of the surtax, the taxable income to be multiplied by the figure determined and proclaimed under subsection (a) shall be computed without regard to the deduction provided in section 242 for partially tax-exempt interest. SEC. 805. 1954 LIFE INSURANCE COMPANY TAXABLE INCOME.

(a) DEFINITION.—For purposes of section 802(b), the term "1954 life insurance company taxable income" means the taxable income (as defined in section 803(g)), plus 8 times the amount of the adjustment for certain reserves provided in section 806, and minus the reserve interest credit, if any, provided in subsection (b) of this section. (b) R E S E R V E INTEREST C R E D I T. — For purposes of subsection (a), the reserve interest credit shall be an amount determined as follows: (1) Divide the amount of the adjusted taxable income (as defined in subsection (c)) by the amount of the required interest (as defined in subsection (d)). §803(i)

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