Page:United States Statutes at Large Volume 76.djvu/1183

 76 STAT.]

PUBLIC LAW 87-858-OCT. 23, 1962 "(B)

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1135

CONTRACTS WITH RESERVES BASED ON A SEGREGATED

ASSET ACCOUNT.—For purposes of this part, a 'contract with reserves based on a segregated asset account' is a contract— " (i) which provides for the allocation of all or part of the amounts received under the contract to an account which, pursuant to State law or regulation, is segregated from the general asset accounts of the company, "(ii) which provides for the payment of annuities, and " (iii) under which the amounts paid in, or the amount paid as annuities, reflect the investment return and the market value of the segregated asset account. If a contract ceases to reflect current investment return and current market value, such contract shall not be considered as meeting the requirements of clause (iii) after such cessation. " (2) L I F E INSURANCE RESERVES.—For purposes of subsection (b)(1)(A) of this section, the reflection oi the investment return and the market value of the segregated asset account shall be considered an assumed rate of interest. "(3) SEPARATE ACCOUNTING.—For purposes of this part, a life insurance company which issues contracts with reserves based on segregated asset accounts shall separately account for the various income, exclusion, deduction, asset, reserve, and other liability items properly attributable to such segregated asset accounts. For such items as are not accounted for directly, separate accounting shall be made— " (A) in accordance with the method regularly employed by such company, if such method is reasonable, and " (B) in all other cases, in accordance with regulations prescribed by the Secretary or his delegate. "(4)

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INVESTMENT YIELD.—

" (A) IN GENERAL.—For purposes of this part, the policy and other contract liability requirements, and the life insurance company's share of investment yield, shall be separately computed— "(i) with respect to the items separately accounted for in accordance with paragraph (3), and "(ii) excluding the items taken into account under clause (i). " (B) CAPITAL GAINS AND LOSSES.—If, without regard to subparagraph (A), the net short-term capital gain exceeds the net long-term capital loss, such excess shall be allocated between clauses (i) and (ii) of subparagraph (A) in proportion to the respective contributions to such excess of the items taken into account under each such clause. "(5)

POLICY AND OTHER CONTRACT LIABILITY REQUIREMENTS.—

For purposes of this part— " (A) with respect to life insurance reserves based on segregated asset accounts, the adjusted reserves rate and the current earnings rate for purposes of section 805(b), and the rate 73 Stat. iis. of interest assumed by the taxpayer for purposes of sections ^^ "^^ ^°^' '•':- ' 805(c) and 809(a)(2), shall be a rate equal to the current 26 USC 809. earnings rate determined under section 805(b)(2) with respect to the items separately accounted for in accordance with paragraph (3) reduced by the percentage obtained by dividing— " (i) any amount retained with respect to such reserves by the life insurance company from gross investment income (as defined in section 804(b)) on segregated 26 USC 804.

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