[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: 26CFR1.809-8]

[Page 635]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Determination of Tax Liability--Table of Contents
 
Sec. 1.809-8  Limitation on deductions for certain mutualization 
distributions.

    (a) Deduction not to reduce taxable investment income. Section 
809(g)(1) limits the deduction under section 809(d)(11) for certain 
mutualization distributions. This limitation provides that such 
deduction shall not exceed the amount (if any) by which the gain from 
operations for the taxable year, computed without regard to such 
deduction (but after the application of the limitation contained in 
section 809(f) and Sec. 1.809-7), exceeds the taxpayer's taxable 
investment income for such year.
    (b) Deduction not to reduce tax below that imposed by 1957 law. 
Section 809(g)(2) further limits the deduction under section 809(d)(11). 
Under section 809(g)(2), such deduction shall be allowed only to the 
extent that it (after the application of all other deductions) does not 
reduce the tax imposed by section 802(a)(1) for the taxable year below 
the amount of tax which would have been imposed for such taxable year if 
the law in effect for 1957 applied for such taxable year. If such 
deduction is claimed for 1958 (or 1959), the company shall attach to its 
return a schedule showing what its tax for 1958 (or 1959) would have 
been had such tax been computed under the law in effect for 1957.
    (c) Application of section 815. Section 809(g)(3) provides that any 
portion of a distribution which is allowed as a deduction under section 
809(d)(11) shall not be treated as a distribution to shareholders for 
purposes of section 815; except that in the case of any distributions 
made in 1959, such portion shall be treated as a distribution with 
respect to which a reduction is required under section 815(e)(2)(B) 
(relating to adjustment in allocation ratio for certain distributions 
after December 31, 1958).

[T.D. 6535, 26 FR 530, Jan. 20, 1961]