Page:United States Statutes at Large Volume 48 Part 1.djvu/758

732 INCOME TAX . INSURANCE CO MPAN IES - Contd . Net income. Deductions from . Tax-free interest . Aide, p. 687. Reserved funds re- quired by law . Policies of combined insurance . Weekly payment plan. Reserves not re- quired by law. Dividends from do- mestic corporations . Post, p. 738. Reser ves for d eferr ed dividends. Investment expenses. Proviso . Limitation on deduc- tion. Realty, etc ., tax es . Exception. If tax paid on share- holder's interest . Property deprecia- tion. I ntere st on inde bted- ness ; exception. 73d C ONGRESS. SESS . II. CH. 277. MAY 10, 1934 . the charter or articles of incorporation of the company or associa- tion exclusively for the payment of claims arising under certificates of membership or policies issued upon the assessment plan and not subject to any other use. SEC. 203 . NET INCOME OF LIFE INSURANCE COMPANIES . (a) GENERA L RULE .- In the c ase of a lif e in sura nce comp any the term " net income " means the gross income less- (1) TAX-FREE INTEREST .-The amount of in terest rece ived dur- ing t he ta xable year which under section 22(b) (4) is excl uded fr om gr oss income ; (2) RESE RVE FUNDS :An amount equal to 4 per centum of the mean of the reserve funds required by law and held at the begin- ning and end of the taxable year, except that in the case of any such reserve fund which is computed at a lower interest assump- tion rate, the rate of 33/ 4 per centum shall be substituted for 4 per centum. Life insurance companies issuing policies covering life, he alth, an d accide nt insura nce comb ined in one poli cy issue d on the weekly premium payment plan, continuing for life and not subject to cancellation, shall be allowed, in addition to the above, a deduction of 33/4 per centum of the mean of such reserve funds (n ot required by la w) held at the beginning and end of the taxable year, as the Commissioner finds to be necessary for the protection of the holders of such policies only ; (3) DIVIDENDS .-The amount received as dividends from a domestic corpora tion whi ch is sub ject to , taxati on under this ti tle, other than a corporation entitled to the benefits of section 251, and other than a corporation organized under the China Trade Act, 1922 ; (4) RESERVE FOR DIVIDENDS .-An amount equal to 2 per centum of any sums held at the end of the taxable year as a reserve for dividends (other than dividends payable during the year fol- lowing the taxable year) the payment of which is deferred for a period of not less than five years from the date of the policy contract ; (5) INVESTMENT EXPENSES .-Investment expenses pa id during the taxable year : Provid ed, That if any general expenses are in pa rt assig ned to o r includ ed in th e invest ment exp enses, t he total deduction under this paragraph shall not exceed one-fourth of 1 per centum of the book value of the mean of the invested assets held at the beginning and end of the taxable year ; (6) REAL ESTATE EXPENSES .-Taxes and other expenses paid during the taxable year exclusively upon or with respect to the real e state owned by the company, not inclu ding taxes asses sed against local benefits of a . kind tending to increase the value of the property assessed, and not including any amount paid out for new b uild ings , or for per mane nt i mpro veme nts or b ette rmen ts made to increase the value of any property . The deduction allowed by this paragraph shall be allowed in the case of taxes impos ed upon a shareholder of a company upon his interest as shareholder, which are paid by the company without reimburse- me nt from the shar eholder, but in such cas es no de duction shall be a llowed the share holder for the a mount of such taxes ; (7) DEPRECIATION .-A reasonable allowance, as provided in sec- tion 23(1), for the exhaustion, wear and tear of property, includ- ing a reasonable allowance for obsolescence ; and (8) INTEREST.-All interest paid within the taxable year on its indebtedness, except on indebtedness incurred or continued to purchase or carry obligations (other than obligations of the