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PUBLIC LAW 86-69-JUNE 25, 1959
[73 S T A T.
the investment yield, then the policyholders' share of any item shall be 100 percent. " (2) TAXABLE INVESTMENT INCOME DEFINED.—For purposes of
26 USC 103,242.
26 USC 243-245.
this part, the taxable investment income for any taxable year shall be an amount (not less than zero) equal to the sum oi the life insurance company's share of each and every item of investment yield (including tax-exempt interest, partially tax-exempt interest, and dividends received), reduced by— " (A) the sum of— " (i) the life insurance company's share of interest which Under section 103 is excluded from gross income, "(ii) the deduction for partially tax-exempt interest provided by section 242 (as modified by paragraph (3)) computed with respect to the life insurance company's share of such interest, and " (iii) the deductions for dividends received provided I^y sectious 243, 244, and 245 (as modified by paragraph (5)) computed with respect to the life insurance company's share of the dividends received; and " (B) the small business deduction provided by paragraph
For purposes of the preceding sentence, the life insurance company's share of any item shall be that percentage which, when added to the percentage obtained under the second sentence of paragraph (1), equals 100 percent. "(3) PARTIALLY TAX-EXEMPT INTEREST.—For purposes of this 26 USC 242. part, the deduction allowed by section 242 shall be an amount which bears the same ratio to the amount determined under such section without regard to this paragraph as (A) the normal tax 26 USC 11. j,j^^g fQY ^j-^g taxable year prescribed by section 11, bears to (B) the sum of the normal tax rate and the surtax rate for the taxable year prescribed by section 11. "(4) SMALL BUSINESS DEDUCTION.—For purposes of this part, the small business deduction is an amount equal to 10 percent of the investment yield for the taxable year. The deduction under this paragraph shall not exceed $25,000. "(5) APPLICATION or SECTION 246(b).—In applying section 26 USC 246. 246(b) (relating to limitation on aggregate amount of deductions for dividends received) for purposes of this subsection, the limit on the aggregate amount of the deductions allowed by sec26 USC 243-245. ^JQ^S 243(a), 244, and 245 shall be 85 percent of the taxable investment income computed without regard to the deductions allowed by such sections. "(6) EXCEPTION.—If it is established in any case that the application of the definition of taxable investment income contained m paragraph (2) results in the imposition of tax on— 26 USC 103. " (A) any interest which under section 103 is excluded from gross income, 26 USC 242. " (B) any amount of interest which under section 242 (as modified by paragraph (3)) is allowable as a deduction, or " (C) any amount of dividends received which under sec26 USC 243-245. tious 243, 244, and 245 (as modified by paragraph (5)) is allowable as a deduction, adjustment shall be made to the extent necessary to prevent sacli imposition. " (b) GROSS INVESTMENT INCOME.—For purposes of this part, the term 'gross investment income' means the sum of the following: "(1) INTEREST, ETC.—The gross amount of income from— " (A) interest, dividends, rents, and royalties,
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