Page:United States Statutes at Large Volume 96 Part 1.djvu/580

 96 STAT. 538

PUBLIC LAW 97-248—SEPT. 3, 1982 paid in cash to the reinsurer on the effective date of such contract, (2) at least 40 percent of the principal of which had been paid by the ceding company in cash as of July 1, 1982, and (3) the remaining balance of which is paid in cash before January 1, 1983. SEC. 258. ALLOCATION OF INCOME, ETC. IN THE CASE OF OTHER REINSURANCE AGREEMENTS.

26 USC 818.

(a) IN GENERAL.—Section 818 (relating to accounting provisions) is amended by adding at the end thereof the following new subsection: "(g) ALLOCATION IN CASE OF REINSURANCE AGREEMENT INVOLVING TAX AVOIDANCE OR EVASION.—In the case of 2 or more related

persons (within the meaning of section 1239(b)) who are parties to a reinsurance agreement, the Secretary may— "(1) allocate between or among such persons income (whether investment income, premium, or otherwise), deductions, assets, reserves, credits, and other items related to such agreement, or "(2) recharacterize any such items, if he determines that such allocation or recharacterization is necessary to reflect the proper source and character of the taxable income (or any item described in paragraph (1) relating to such taxable income) of each such person.". 26 USC 818 note. (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to agreements entered into after the date of the enactment of this Act. PART II—2-YEAR TEMPORARY PROVISIONS RELATING TO TAXATION OF LIFE INSURANCE COMPANIES SEC. 259. INCREASE IN AMOUNT OF DIVIDEND DEDUCTION ALLOWED; PENSION PLAN RESERVES.

26 USC 809.

(a) INCREASE IN LIMITATION.—Section 809(f) (relating to limitation on certain deductions) is amended to read as follows: "(fi LIMITATION ON CERTAIN DEDUCTIONS.—

"(1) IN GENERAL.—The amount of the deductions under paragraphs (3), (5), and (6) of subsection (d) shall not exceed the greater of— "(A) $1,000,000, plus the amount (if any) by which— "(i) the gain from operations for the taxable year (computed without regard to such deductions), exceeds "(ii) the taxable investment income for the taxable year, or "(B) if the taxpayer elects for any taxable year, the amount determined under paragraph (2). "(2) ALTERNATIVE LIMITATION.—The amount determined under this paragraph for any taxable year shall be equal to the sum of— "(A) that portion of the deduction under subsection (d)(3) which is allocable to any contract described in section 805(d), and "(B) an amount equal to the sum of— "(i) so much of the base amount as does not exceed $1,000,000, plus "(ii) in the case of— "(I) a mutual life insurance company, 77.5 percent of the base amount, or

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