Page:United States Statutes at Large Volume 73.djvu/164

 126

PUBLIC LAW 86-69-JUNE 25, 1959

[73 STAT.

under this paragraph shall be taken into account for the preceding taxable year. "(3) EFFECT OF PRELIMINARY TERM ELECTION.—An election under section 818(c) shall not be treated as a change in the basis for determining an item referred to in subsection (c) to which this subsection applies. If an election under section 818(c) applies for the taxable year, the amounts of the items referred to in subparagraphs (A) and (B) of paragraph (1) shall be determined without regard to such election. If such an election would apply in respect of such item for the taxable year but for the new basis, the amount of the item referred to in subparagraph (BJ shall be determined on the basis which would have been applicable under section 818(c) if the election applied in respect of the item for the taxable year. "(e) CERTAIN DECREASES IN RESERVES or VOLUNTARY EMPLOYEES' BENEFICIARY ASSOCIATIONS.— "(1) DECREASES DUE TO VOLUNTARY LAPSES OF POLICIES ISSUED BEFORE JANUARY 1, 1G58.—For purposes of subsections (a) and

26 USC 501.

(b), in the case of a life insurance company which meets the requirements of section 501(c)(9) other than the requirement of subparagraph (B) thereof, there shall be taken into account only 111^ percent of any decrease in the life insurance reserve on any policy issued before January 1, 1958, which is attributable solely to the voluntary lapse of such policy on or after January 1, 1958. In applying the preceding sentence, the decrease in the reserve for any policy shall be determined by reference to the amount of such reserve as of the beginning of the taxable year, reduced by any amount allowable as a deduction under section 809(d)(1) in respect of such policy by reason of such lapse. This paragraph shall apply for any taxable year only if the taxpayer has made an election under paragraph,(3) which is effective for such taxable year. "(2)

DISALLOWANCE OF CARRYOVERS FROM PRE-ID58 LOSSES FROM

OPERATIONS.—In the case of a life insurance company to which paragraph (1) applies for the taxable year, section 812(b)(1) shall not apply with respect to any loss from operations for any taxable year oeginning before January 1, 1968. "(3) ELECTION.—Paragraph (1) shall apply to any taxpayer for any taxable year only if the taxpayer elects, not later than the time prescribed by law (including extensions thereof) for filing the return for such taxable year, to have such paragraph appfy. Such election shall be made in such manner as the Secretary or his delegate shall prescribe by regulations. Such election shall be effective for the taxable year for which made and for all succeeding taxable years, and shall not be revoked except with the consent of the Secretary or his delegate. "SEC. 811. DIVIDENDS TO POLICYHOLDERS. "(a) DIVIDENDS TO POLICYHOLDERS DEFINED.—For purposes of this art, the term 'dividends to policyholders' means §istributions to policyholders in their capacity dividends and similar as such. Such term does not include interest paid (as defined in section 805(e)). "(b)

AMOUNT OF DEDUCTION.—

"(1) IN GENERAL.—Except as limited by section 809(f), the deduction for dividends to policyholders for any taxable year shall be an amount equal to the dividends to policyholders paid during the taxable year— "(A) increased by the excess of (i) the amounts held at the end of the taxable year as reserves for dividends to policyholders (as defined in subsection (a)) payable during the

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