Internal Revenue Code:Sec. 805. General deductions

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Contents


Location in Internal Revenue Code


     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle A - Income Taxes
       CHAPTER 1 - NORMAL TAXES AND SURTAXES
        Subchapter L - Insurance Companies
         PART I - LIFE INSURANCE COMPANIES
          Subpart C - Life Insurance Deductions
        

Statute

    Sec. 805. General deductions
 
    (a) General rule
      For purposes of this part, there shall be allowed the following
    deductions:
      (1) Death benefits, etc.
        All claims and benefits accrued, and all losses incurred
      (whether or not ascertained), during the taxable year on
      insurance and annuity contracts.
      (2) Increases in certain reserves
        The net increase in reserves which is required by section
      807(b) to be taken into account under this paragraph.
      (3) Policyholder dividends
        The deduction for policyholder dividends (determined under
      section 808(c)).
      (4) Dividends received by company
        (A) In general
          The deductions provided by sections 243, 244, and 245 (as
        modified by subparagraph (B)) -
            (i) for 100 percent dividends received, and
            (ii) for the life insurance company's share of the
          dividends (other than 100 percent dividends) received.
        (B) Application of section 246(b)
          In applying section 246(b) (relating to limitation on
        aggregate amount of deductions for dividends received) for
        purposes of subparagraph (A), the limit on the aggregate amount
        of the deductions allowed by sections 243(a)(1), 244(a), and
        245 shall be the percentage determined under section 246(b)(3)
        of the life insurance company taxable income (and such
        limitation shall be applied as provided in section 246(b)(3)),
        computed without regard to -
            (i) the small life insurance company deduction,
            (ii) the operations loss deduction provided by section 810,
            (iii) the deductions allowed by sections 243(a)(1), 244(a),
          and 245, and
            (iv) any capital loss carryback to the taxable year under
          section 1212(a)(1),
        but such limit shall not apply for any taxable year for which
        there is a loss from operations.
        (C) 100 percent dividend
          For purposes of subparagraph (A) -
          (i) In general
            Except as provided in clause (ii), the term ''100 percent
          dividend'' means any dividend if the percentage used for
          purposes of determining the deduction allowable under section
          243, 244, or 245(b) is 100 percent.
          (ii) Treatment of dividends from noninsurance companies
            The term ''100 percent dividend'' does not include any
          distribution by a corporation which is not an insurance
          company to the extent such distribution is out of tax-exempt
          interest, or out of the increase for the taxable year in
          policy cash values (within the meaning of subparagraph (F))
          of life insurance policies and annuity and endowment
          contracts to which section 264(f) applies, or out of
          dividends which are not 100 percent dividends (determined
          with the application of this clause as if it applies to
          distributions by all corporations including insurance
          companies).
        (D) Special rules for certain dividends from insurance
            companies
          (i) In general
            In the case of any 100 percent dividend paid to any life
          insurance company out of the earnings and profits for any
          taxable year beginning after December 31, 1983, of another
          life insurance company if -
              (I) the paying company's share determined under section
            812 for such taxable year, exceeds
              (II) the receiving company's share determined under
            section 812 for its taxable year in which the dividend is
            received or accrued,
         the deduction allowed under section 243, 244, or 245(b) (as
          the case may be) shall be reduced as provided in clause (ii).
          (ii) Amount of reduction
            The reduction under this clause for a dividend is an amount
          equal to -
              (I) the portion of such dividend attributable to prorated
            amounts, multiplied by
              (II) the percentage obtained by subtracting the share
            described in subclause (II) of clause (i) from the share
            described in subclause (I) of such clause.
          (iii) Prorated amounts
            For purposes of this subparagraph, the term ''prorated
          amounts'' means tax-exempt interest, the increase for the
          taxable year in policy cash values (within the meaning of
          subparagraph (F)) of life insurance policies and annuity and
          endowment contracts to which section 264(f) applies, and
          dividends other than 100 percent dividends.
          (iv) Portion of dividend attributable to prorated amounts
            For purposes of this subparagraph, in determining the
          portion of any dividend attributable to prorated amounts -
              (I) any dividend by the paying corporation shall be
            treated as paid first out of earnings and profits for
            taxable years beginning after December 31, 1983,
            attributable to prorated amounts (to the extent thereof),
            and
              (II) by determining the portion of earnings and profits
            so attributable without any reduction for the tax imposed
            by this chapter.
          (v) Subparagraph to apply to dividends from other insurance
              companies
            Rules similar to the rules of this subsection shall apply
          in the case of 100 percent dividends paid by an insurance
          company which is not a life insurance company.
        (E) Certain dividends received by foreign corporations
          Subparagraph (A)(i) (and not subparagraph (A)(ii)) shall
        apply to any dividend received by a foreign corporation from a
        domestic corporation which would be a 100 percent dividend if
        section 1504(b)(3) did not apply for purposes of applying
        section 243(b)(2).
        (F) Increase in policy cash values
          For purposes of subparagraphs (C) and (D) -
          (i) In general
            The increase in the policy cash value for any taxable year
          with respect to policy or contract is the amount of the
          increase in the adjusted cash value during such taxable year
          determined without regard to -
              (I) gross premiums paid during such taxable year, and
              (II) distributions (other than amounts includible in the
            policyholder's gross income) during such taxable year to
            which section 72(e) applies.
          (ii) Adjusted cash value
            For purposes of clause (i), the term ''adjusted cash
          value'' means the cash surrender value of the policy or
          contract increased by the sum of -
              (I) commissions payable with respect to such policy or
            contract for the taxable year, and
              (II) asset management fees, surrender charges, mortality
            and expense charges, and any other fees or charges
            specified in regulations prescribed by the Secretary which
            are imposed (or which would be imposed were the policy or
            contract canceled) with respect to such policy or contract
            for the taxable year.
      (5) Operations loss deduction
        The operations loss deduction (determined under section 810).
      (6) Assumption by another person of liabilities under insurance,
          etc., contracts
        The consideration (other than consideration arising out of
      indemnity reinsurance) in respect of the assumption by another
      person of liabilities under insurance and annuity contracts.
      (7) Reimbursable dividends
        The amount of policyholder dividends which -
          (A) are paid or accrued by another insurance company in
        respect of policies the taxpayer has reinsured, and
          (B) are reimbursable by the taxpayer under the terms of the
        reinsurance contract.
      (8) Other deductions
        Subject to the modifications provided by subsection (b), all
      other deductions allowed under this subtitle for purposes of
      computing taxable income.
    Except as provided in paragraph (3), no amount shall be allowed as
    a deduction under this part in respect of policyholder dividends.
    (b) Modifications
      The modifications referred to in subsection (a)(8) are as
    follows:
      (1) Interest
        In applying section 163 (relating to deduction for interest),
      no deduction shall be allowed for interest in respect of items
      described in section 807(c).
      (2) Charitable, etc., contributions and gifts
        In applying section 170 -
          (A) the limit on the total deductions under such section
        provided by section 170(b)(2) shall be 10 percent of the life
        insurance company taxable income computed without regard to -
            (i) the deduction provided by section 170,
            (ii) the deductions provided by paragraphs (3) and (4) of
          subsection (a),
            (iii) the small life insurance company deduction,
            (iv) any operations loss carryback to the taxable year
          under section 810, and
            (v) any capital loss carryback to the taxable year under
          section 1212(a)(1), and
          (B) under regulations prescribed by the Secretary, a rule
        similar to the rule contained in section 170(d)(2)(B) (relating
        to special rule for net operating loss carryovers) shall be
        applied.
      (3) Amortizable bond premium
        (A) In general
          Section 171 shall not apply.
        (B) Cross reference
          For rules relating to amortizable bond premium, see section
        811(b).
      (4) Net operating loss deduction
        Except as provided by section 844, the deduction for net
      operating losses provided in section 172 shall not be allowed.
      (5) Dividends received deduction
        Except as provided in subsection (a)(4), the deductions for
      dividends received provided by sections 243, 244, and 245 shall
      not be allowed.
 

Sources

    (Added Pub. L. 98-369, div.  A, title II, Sec. 211(a), July 18,
    1984, 98 Stat. 722; amended Pub. L. 99-514, title VI, Sec.
    611(a)(5), title VIII, Sec. 805(c)(6), title X, Sec. 1011(b)(4),
    title XVIII, Sec. 1821(p), Oct. 22, 1986, 100 Stat. 2249, 2362,
    2389, 2842; Pub. L. 100-203, title X, Sec. 10221(c)(2), Dec. 22,
    1987, 101 Stat. 1330-409; Pub. L. 104-188, title I, Sec.
    1702(h)(3), Aug. 20, 1996, 110 Stat. 1873; Pub. L. 105-34, title X,
    Sec. 1084(b)(1), Aug. 5, 1997, 111 Stat. 954.)
 

Codification

                                CODIFICATION
      Another section 1084(b) of Pub. L. 105-34 amended sections 101
    and 264 of this title.
 

Miscellaneous

                              PRIOR PROVISIONS
      A prior section 805, added Pub. L. 86-69, Sec. 2(a), June 25,
    1959, 73 Stat. 118; amended Pub. L. 87-792, Sec. 7(g), Oct. 10,
    1962, 76 Stat. 829; Pub. L. 88-571, Sec. 5(a), Sept. 2, 1964, 78
    Stat. 860; Pub. L. 91-172, title IX, Sec. 907(a)(1), Dec. 30, 1969,
    83 Stat. 715; Pub. L. 93-406, title II, Sec. 1016(a)(6),
    2002(g)(9), 2004(c)(3), Sept. 2, 1974, 88 Stat. 929, 970, 986; Pub.
    L. 94-267, Sec. (1)(c)(4), Apr. 15, 1976, 90 Stat. 367; Pub. L.
    94-455, title XIX, Sec. 1901(a)(97), Oct. 4, 1976, 90 Stat. 1780;
    Pub. L. 95-600, title I, Sec. 141(f)(9), 155(a), Nov. 6, 1978, 92
    Stat. 2795, 2801; Pub. L. 97-248, title II, Sec. 257(a), 260(b),
    261, 264(a)-(c)(1), Sept. 3, 1982, 96 Stat. 537, 540, 543, 544,
    related to policy and other contract liability requirements, prior
    to general revision of this part by Pub. L. 98-369, Sec. 211(a).
      Another prior section 805, acts Aug. 16, 1954, ch. 736, 68A Stat.
    258; Mar. 13, 1956, ch. 83, Sec. 2, 70 Stat. 43, authorized a
    special interest deduction, prior to the general revision of this
    part by Pub. L. 86-69, Sec. 2(a).
                                 AMENDMENTS
      1997 - Subsec. (a)(4)(C)(ii). Pub. L. 105-34, Sec. 1084(b)(1)(A),
    inserted '', or out of the increase for the taxable year in policy
    cash values (within the meaning of subparagraph (F)) of life
    insurance policies and annuity and endowment contracts to which
    section 264(f) applies,'' after ''tax-exempt interest''.
      Subsec. (a)(4)(D)(iii). Pub. L. 105-34, Sec. 1084(b)(1)(B),
    substituted '', the increase for the taxable year in policy cash
    values (within the meaning of subparagraph (F)) of life insurance
    policies and annuity and endowment contracts to which section
    264(f) applies, and'' for ''and''.
      Subsec. (a)(4)(F). Pub. L. 105-34, Sec. 1084(b)(1)(C), added
    subpar. (F).
      1996 - Subsec. (a)(4)(E). Pub. L. 104-188 substituted
    ''243(b)(2)'' for ''243(b)(5)''.
      1987 - Subsec. (a)(4)(B). Pub. L. 100-203 substituted ''shall be
    the percentage determined under section 246(b)(3) of the life
    insurance company taxable income (and such limitation shall be
    applied as provided in section 246(b)(3))'' for ''shall be 80
    percent of the life insurance company taxable income''.
      1986 - Subsec. (a)(4)(B). Pub. L. 99-514, Sec. 611(a)(5),
    substituted ''80 percent'' for ''85 percent'' in introductory
    provisions.
      Subsec. (a)(4)(B)(i). Pub. L. 99-514, Sec. 1011(b)(4), struck out
    ''the special life insurance company deduction and'' before ''the
    small life''.
      Subsec. (a)(4)(C) to (E). Pub. L. 99-514, Sec. 1821(p), added
    subpars. (C) and (D), redesignated former subpar. (D) as (E), and
    struck out former subpar. (C) which read as follows: ''For purposes
    of subparagraph (A), the term '100 percent dividend' means any
    dividend if the percentage used for purposes of determining the
    deduction allowable under section 243 or 244 is 100 percent.  Such
    term does not include any dividend to the extent it is a
    distribution out of tax-exempt interest or out of dividends which
    are not 100 percent dividends (determined with the application of
    this sentence).''
      Subsec. (b)(2). Pub. L. 99-514, Sec. 805(c)(6), redesignated par.
    (3) as (2). Former par. (2), which provided that section 166(c)
    (relating to reserve for bad debts) shall not apply, was struck
    out.
      Subsec. (b)(2)(A)(iii). Pub. L. 99-514, Sec. 1011(b)(4), which
    directed that subsec. (b)(3)(A)(iii) be amended by striking out
    ''the special life insurance company deduction and'' before ''the
    small life'', was executed to subsec. (b)(2)(A)(iii) to reflect the
    probable intent of Congress and the redesignation of subsec. (b)(3)
    as (b)(2) by Pub. L. 99-514, Sec. 805(c)(6).
      Subsec. (b)(3) to (6). Pub. L. 99-514, Sec. 805(c)(6),
    redesignated pars. (3) to (6) as (2) to (5), respectively.
                      EFFECTIVE DATE OF 1997 AMENDMENT
      Amendment by Pub. L. 105-34 applicable to contracts issued after
    June 8, 1997, in taxable years ending after such date, with special
    provisions relating to changes in contracts to be treated as new
    contracts, see section 1084(d) of Pub. L. 105-34, set out as a note
    under section 101 of this title.
                      EFFECTIVE DATE OF 1996 AMENDMENT
      Amendment by Pub. L. 104-188 effective, except as otherwise
    expressly provided, as if included in the provision of the Revenue
    Reconciliation Act of 1990, Pub. L. 101-508, title XI, to which
    such amendment relates, see section 1702(i) of Pub. L. 104-188, set
    out as a note under section 38 of this title.
                      EFFECTIVE DATE OF 1987 AMENDMENT
      Amendment by Pub. L. 100-203 applicable to taxable years
    beginning after Dec. 31, 1987, see section 10221(e)(2) of Pub. L.
    100-203, as amended, set out as a note under section 243 of this
    title.
                      EFFECTIVE DATE OF 1986 AMENDMENT
      Amendment by section 611(a)(5) of Pub. L. 99-514 applicable to
    dividends received or accrued after Dec. 31, 1986, in taxable years
    ending after such date, see section 611(b)(1) of Pub. L. 99-514,
    set out as a note under section 246 of this title.
      Amendment by section 805(c)(6) of Pub. L. 99-514 applicable to
    taxable years beginning after Dec. 31, 1986, with certain changes
    required in method of accounting, see section 805(d) of Pub. L.
    99-514, set out as a note under section 166 of this title.
      Amendment by section 1011(b)(4) of Pub. L. 99-514 applicable to
    taxable years beginning after Dec. 31, 1986, see section 1011(c)(1)
    of Pub. L. 99-514, set out as a note under section 453B of this
    title.
      Amendment by section 1821(p) of Pub. L. 99-514 effective, except
    as otherwise provided, as if included in the provisions of the Tax
    Reform Act of 1984, Pub. L. 98-369, div.  A, to which such
    amendment relates, see section 1881 of Pub. L. 99-514, set out as a
    note under section 48 of this title.
                               EFFECTIVE DATE
      Section applicable to taxable years beginning after Dec. 31,
    1983, see section 215 of Pub. L. 98-369, set out as a note under
    section 801 of this title.
             PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
      For provisions directing that if any amendments made by subtitle
    A or subtitle C of title XI (Sec. 1101-1147 and 1171-1177) or title
    XVIII (Sec. 1800-1899A) of Pub. L. 99-514 require an amendment to
    any plan, such plan amendment shall not be required to be made
    before the first plan year beginning on or after Jan. 1, 1989, see
    section 1140 of Pub. L. 99-514, as amended, set out as a note under
    section 401 of this title.
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in sections 805, 807, 810, 812, 815,
    817, 818, 832, 953 of this title.
 

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