Page:United States Statutes at Large Volume 73.djvu/169

 73 S T A T. ]

PUBLIC LAW 86-69-JUNE 26, 1969

surance company, then any distribution to shareholders during such taxable year shall be treated as made on the last day of the last preceding taxable year for which the taxpayer was a life insurance company. "(8)

TREATMENT or CERTAIN INDEBTEDNESS.—If—

"(A) the taxpayer makes any payment in discharge of its indebtedness, and "(B) such indebtedness is attributable to a distribution by the taxpayer to its shareholders after February 9, 1969, then the amount of such payment shall, for purposes or this section and section 802(b)(3), be treated as a distribution in cash to shareholders, but only to the extent that the distribution referred to in subparagraph (B) was treated as made out of accounts other than the shareholders and policyholders surplus accounts. "(4)

LIMITATION ON AMOUNT IN

POLICYHOLDERS SURPLUS

ACCOUNT.—There shall be treated as a subtraction from the policyholders surplus account for a taxable year for which the taxpayer is a life insurance company the amount by which the policyliolders surplus account (computed at the end of the taxable year without regard to this paragraph) exceeds whichever of the following is the greatest— "(A) 15 percent of life insurance reserves at the end of the taxable year, "(B) 25 percent of the amount by which the life insurance reserves at the end of the taxable year exceed the life insurance reserves at the end of 1958, or "(C) 50 percent of the net amount of the premiums and other consideration taken into account for the taxable year under section 809(c)(1). The amount so treated as subtracted, less the amount of the tax imposed with respect to such amount by reason of section 802 (b)(8)j shall be added to the shareholders surplus account as of the beginning of the succeeding taxable year. "(e) SPECIAL RULE FOR CERTAIN MUTUALIZATIONS.—

"(1) IN GENERAL.—For purposes of this section and section 802 (b)(8),^ any distribution to shareholders after December 31, 1958. in acquisition of stock pursuant to a plan of mutualization shall be treated— "(A) first, as made out of paid-in capital and paid-in surplus, to the extent thereof, "(B) thereafter, as made in two allocable parts— "(i) one part of which is made out of the other accounts referred to in subsection (a)(3), and " (ii) the remainder of which is a distribution to which subsection (a) applies. "(2)

SPECIAL RULES.— "(A) ALLOCATION RATIO.—The

part referred to in paragraph (1)(B)(i) is the amount which bears the same ratio to the amount to which paragraph (1)(B) applies as— "(i) the excess (determined as of December 81, 1968, and adjusted to the beginning of the year of the distribution as provided in subparagraph (B)) of the assets over the total liabilities, bears to "(ii) the sum (determined as of the beginning of the year of the distribution") of the excess described in clar.se (i), the amount in the snareholders surplus account, plus the amount in the policyholders surplus account.

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