Page:United States Statutes at Large Volume 96 Part 1.djvu/579

 PUBLIC LAW 97-248—SEPT. 3, 1982

96 STAT. 537

(1) IN GENERAL.—In any case in which— (A) a tax p a y e r is the reinsured under any contract— (i) which took effect in 1980 or 1981, and (ii) with respect to which a n election under section 820 of the I n t e r n a l Revenue Code of 1954 was made, (B) the tax p a y e r has a loss from operations or its gain from operations (determined without regard to any deduction under paragraph s (3), (5), and (6) of section 809(d) of such Code) for the taxable year in which such contract took effect does not exceed the taxpayer's taxable investment income for such taxable year, (C) such contract w a s not a contract with a person who, during the taxable year in which such contract took effect, was a m e m b e r of the s a m e affiliated group (determined under section 1504 of such Code without regard to subsection (b)) of which the tax p a y e r is a member, and (D) the tax p a y e r m a k e s a n election under this subsection within 6 months after the date of the e n a c t m e n t of this Act, then the provisions of paragraph (2) shall apply.

Ante, p. 533.

(2) RULES W H I C H APPLY I F THIS SUBSECTION APPLIES.—In any

case described in paragraph (1)— (A) the tax p a y e r shall, for all taxable years, be t r e a t e d as not having made a n election under section 820 of such Code with respect to the contract described in paragraph (1), b u t (B) all other parties to the contract shall be t r e a t e d a s having made such election with respect to such contract for all taxable years. (g) TAXABLE YEAR 1982.—For purposes of this section, the term "taxable year 1982" means, with respect to any taxpayer, the first taxable year of the tax p a y e r beginning after December 31, 1981. (h) REGULATIONS.—The Secretary of the Treasury or his delegate shall prescribe such regulations as may be necessary or a p p r o p r i a t e to c a r r y out the purposes of this section. Subpart B—Other R e insurance Agreements SEC. 257. DENIAL OF INTEREST DEDUCTION ON INDEBTEDNESS INCURRED IN CONNECTION WITH REINSURANCE AGREEMENTS.

(a) IN GENERAL.—Section 805(e) (relating to interest paid) is amended by adding a t the end thereof the following new sentence: "For purposes of this subpart, the interest paid for any taxable year shall not include any interest paid or accrued after December 31, 1981, by a ceding company (or its affiliates) to any person in connection with a r e insurance a g r e e m e n t (other than interest on account of delay in making periodic settlements of income and expense items under the term s of the agreement)."

26 USC 805.

(b) SPECIAL TRANSITIONAL RULE W H E R E AT LEAST 20 P E R C E N TO F THE LIABILITIES R E I N S U R E D A R E P A I D IN CASH, E T C. — The amend -

26 USC 805 note.

m e n t made by subsection (a) shall not apply with respect to any interest paid or incurred by a ceding company to a person who is a member of the s a m e affiliated group (within the m e a n i n g of section 1504 of the I n t e r n a l Revenue Code of 1954) on indebtedness evidenced by a note— (1) which was entered into after December 31, 1981, with respect to a reinsurance contract under the term s of which a n a m o u n t not less than 20 percent of the a m o u n t s reinsured w a s

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