[Code of Federal Regulations]
[Title 26, Volume 8]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.809-6]

[Page 633-634]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Determination of Tax Liability--Table of Contents
 
Sec. 1.809-6  Modifications.

    Under section 809(e), the deductions allowed under section 
809(d)(12) and paragraph (a)(12) of Sec. 1.809-5 (relating to other 
deductions) are subject to the following modifications:
    (a) Interest. No deduction shall be allowed under section 163 for 
interest in respect of items described in section 810(c) since such 
interest is taken into account in the determination of required interest 
under section 809.
    (b) Bad debts. No deduction shall be allowed for an addition to 
reserves for bad debts under section 166(c). However, a deduction for 
specific bad debts shall be allowed to the extent that such deduction is 
allowed under section 166 and the regulations thereunder. In the case of 
a loss incurred on the sale of mortgaged or pledged property, see Sec. 
1.166-6 of this chapter.
    (c) Charitable, etc., contributions and gifts. (1) The deduction by 
a life insurance company in any taxable year for a charitable 
contribution (as defined in section 170(c)) shall be limited to 5 
percent of the gain from operations (as determined under section 
809(b)(1)), computed without regard to any deductions for:
    (i) Charitable contributions under section 170;
    (ii) Dividends to policyholders under section 811(b);
    (iii) Certain nonparticipating contracts under section 809(d)(5);
    (iv) Group life insurance contracts and group accident and health 
insurance contracts under section 809(d)(6);
    (v) Tax-exempt interest, dividends, etc., under section 809(d)(8); 
and
    (vi) Any operations loss carryback to the taxable year under section 
812.
    (2) In applying the first sentence of section 170(b)(2) as contained 
in section 170 or, in the case of taxable years beginning after December 
31, 1969, section 170(d)(2)(B) as contained in section 170A, any excess 
of the charitable contributions made by a life insurance company in a 
taxable year over the amount deductible in such year under the 
limitation contained in subparagraph (1) of this paragraph, shall be 
reduced to the extent that such excess:
    (i) Reduces life insurance company taxable income (computed without 
regard to section 802(b)(3)) for the purpose of determining the offsets 
referred to in section 812(b)(2); and
    (ii) Increases an operations loss carryover under section 812 for a 
succeeding taxable year.
    (3) The application of the rules provided in section 809(e)(3) and 
this paragraph may be illustrated by the following example:

    Example. Assume that life insurance company P is organized on 
January 1, 1958, and has a loss from operations for that year in the 
amount of $100,000 which is an operations loss carryover to 1959. In 
1959, company P has a gain from operations and tax base (computed 
without regard to section 802(b)(3)) of $100,000 before the allowance of 
a deduction for a $5,000 charitable contribution made in 1959 and before 
the application of the operations loss carryover from 1958. Under 
section 170(b)(2), the operations loss carryover from 1958 is first 
applied to eliminate the $100,000 gain from operations and tax base in 
1959 and the $5,000 charitable contribution carryover would (except for 
the limitation contained in this paragraph) become a charitable 
contribution carryover to 1960. However, for the purpose of computing 
the offsets referred to in section 812(b)(2), the $5,000 charitable 
contribution is applied to reduce the gain from operations and tax base 
for 1959 to $95,000 before the application of the operations carryover 
from 1958. Since only $95,000 of the $100,000 loss from operations in 
1958 is an offset for 1959, the remaining $5,000 becomes an operations 
loss carryover to 1960. Accordingly, under the limitation contained in 
this paragraph, the charitable contributions carryover provided under 
the second sentence of section 170(b)(2) is eliminated.

    (d) Amortizable bond premium. No deduction shall be allowed under 
section 171 for the amortization of bond premiums since a special 
deduction for such premiums is specifically taken into account under 
section 818(b).
    (e) Net operating loss deduction. No deduction shall be allowed 
under section 172 since section 812 allows an ``operations loss 
deduction''.
    (f) Partially tax-exempt interest. No deduction shall be allowed 
under section

[[Page 634]]

242 for partially tax-exempt interest since section 809(d)(8) allows a 
deduction for such interest.
    (g) Dividends received. No deduction shall be allowed under sections 
243, 244, and 245 for dividends received since section 809(d)(8) allows 
a deduction for such dividends.

[T.D. 6535, 26 FR 529, Jan. 20, 1961, as amended by T.D. 7207, 37 FR 
20797, Oct. 5, 1972]