Page:United States Statutes at Large Volume 70.djvu/98

 42

PUBLIC LAW 429-MAR. 13, 1966

[70 S T A T.

means the ratio obtained by dividing the sum obtained under paragraph (1) of section 805(c) by the sum obtained under paragraph (1)(B) of section 805(c). "(3) DIVIDENDS RECEIVED DEDUCTION AVHEUE MAXIMUM LIMIT APPLIES.

" (A) If paragraph (1) of this subsection reduces the reserve and other policy liability deduction allowed by this section or section 812 for the taxable year, then in computing life insurance taxable income under section 802(b), and in computing life insurance company taxable income under section 811(b), there shall be allowed an additional deduction in an amount determined under subparagraph (B). " (B) The amount of the additional deduction referred to in subparagraph (A) shall be the amount which bears the same ratio to the total of the deductions provided in sections 26'^lcf*243-245. ^^^' ^^^' ^^^ ^^^ ^^ the net investment income reduced by the sum of— "(1) the net investment income allocable to non-life insurance reserves (or, for purposes of section 811(b), the amount of the adjustment for certain reserves provided in section 813), and "(ii) 100/85 of the maximum limitation determined under paragraphs (1) and (2) of this subsection, bears to the net investment income. "(c) QUALIFIED KESERVES DEFINED.-—For purposes of this subpart, the term 'qualified reserves' means the sum of the following: "(1) The life insurance reserves (as defined in section 801 (b)), plus 7 percent of that portion of such reserves as are computed on a preliminary term basis. "(2) The non-life insurance reserves (as defined in subsection (d)(2)). "(3) The amounts (discounted at the rates of interest assumed by the company) necessary to satisfj^ the obligations under insurance and annuity contracts (including contracts supplementary thereto), but only if (A) such obligations when satisfied will reflect an increment in the nature of interest, and (B) such obligations do not involve (at the time v^^ith respect to which the computation is made under this paragraph) life, health, or accident contingencies. " (4) The amounts held at the end of the taxable year as reserves for dividends to policyholders, the payment of which dividends is deferred for a period which expires not earlier than 5 years from the date of the policy contract. This paragraph does not apply to dividends payable during the year following the taxable year. " (5) Dividend accumulations, and other amounts, held at interest in connection with insurance or annuity contracts (including contracts supplementary thereto). " (6) Premiums received in advance, and liabilities for premium deposit funds. I n applying this subsection the same item shall be counted only once. For purposes of this section (other than paragraph (4) of this subsection), the amount of any reserve (or portion thereof) for any taxable year shall be the mean of such reserve (or portion thereof) at the beginning and end of the taxable year. " (d) N E T INVESTMENT INCOME ALLOCABLE TO N O N - L I F E INSURANCE IvESERVES.— "(1) ALLOCATION RATIO.—For purposes of this subpart, the

net investment income allocable to non-life insurance reserves is

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