Page:United States Statutes at Large Volume 98 Part 1.djvu/807

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 759

decrease in reserves as a result of a change in a taxable year beginning before 1984 shall be taken into account in any taxable year beginning after 1983. (B) ADJUSTMENTS ATTRIBUTABLE TO INCREASES IN RESERVES.—

(i) IN GENERAL.—Any adjustment under section 810(d) of the Internal Revenue Code of 1954 (as so in effect) attributable to an increase in reserves as a result of a change in a taxable year beginning before 1984 shall be taken into account in taxable years beginning after 1983 to the extent that— (I) the amount of the adjustments which would be taken into account under such section in taxable years beginning after 1983 without regard to this subparagraph, exceeds (II) the amount of any fresh start adjustment attributable to contracts for which there was such an increase in reserves as a result of such change. (ii) FRESH START ADJUSTMENT.—For purposes of clause

(i), the fresh start adjustment with respect to any contract is the excess (if any) of— (I) the reserve attributable to such contract as of the close of the taxpayer's last taxable year beginning before January 1, 1984, over (II) the reserve for such contract as of the beginning of the taxpayer's first taxable year beginning after 1983 as recomputed under subsection (a) of this section. (C) RELATED INCOME INCLUSIONS NOT TAKEN INTO ACCOUNT

TO THE EXTENT DEDUCTION DISALLOWED UNDER SUBPARAGRAPH (b).—No premium shall be included in income to the extent such premium is directly related to an increase in a reserve for which a deduction is disallowed by subparagraph (B). (3) REINSURANCE TRANSACTIONS, AND RESERVE STRENGTHENING, AFTER SEPTEMBER 27, 1983.—

(A) IN GENERAL.—Paragraph (1) shall not apply (and section 807(f) of the Internal Revenue Code of 1954 as Ante, p. 726. amended by this subtitle shall apply)— (i) to any reserve transferred pursuant to— (I) a reinsurance agreement entered into after September 27, 1983, and before January 1, 1984, or (II) a modification of a reinsurance agreement made after September 27, 1983, and before January 1, 1984, and (ii) to any reserve strengthening reported for Federal income tax purposes after September 27, 1983, for a taxable year ending before January 1, 1984. Clause (ii) shall not apply to the computation of reserves on any contract issued if such computation employs the reserve practice used for purposes of the most recent annual statement filed before September 27, 1983, for the type of contract with respect to which such reserves are set up. (B) TREATMENT OF RESERVE ATTRIBUTABLE TO SECTION

818(c) ELECTION.—In the case of any reserve described in subparagraph (A), for purposes of section 807(f) of the Internal Revenue Code of 1954, any change in the treatment of

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