[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: 26CFR1.810-4]

[Page 641-642]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Determination of Tax Liability--Table of Contents
 
Sec. 1.810-4  Certain decreases in reserves of voluntary employees' 
beneficiary associations.

    (a) Decreases due to voluntary lapses of policies issued before 
January 1, 1958. (1) Section 810(e) provides that if for any taxable 
year a life insurance company which meets the requirements of section 
501(c)(9), other than the requirement of subparagraph (B) thereof, makes 
an election in the manner provided in section 810(e)(3) and paragraph 
(b) of this section, only 11\1/2\ percent of any decrease in life 
insurance reserves (as defined in section 801(b) and Sec. 1.801-4) 
attributable to the voluntary lapse on or after January 1, 1958, of any 
policy issued prior to that date shall be taken into account under 
section 810 (a) or (b) and paragraph (a) of Sec. 1.810-2 in determining 
the net increase or decrease in the sum of the items described in 
section 810(c) during the taxable year. In applying the preceding 
sentence, the decrease in the reserve for any policy shall be determined 
by reference to the amount of such reserve at the beginning of the 
taxable year, reduced by any amount allowable as a deduction under 
section 809(d)(1) and paragraph (a)(1) of Sec. 1.809-5 in respect of 
such policy by reason of such lapse. The election under section 810(e) 
shall be adhered to in computing the company's gain or loss from 
operation for the taxable year for which the election is made and for 
all subsequent taxable years, unless consent to revoke such election is 
obtained from the Commissioner.
    (2) The application of the election provided under section 810(e) 
and subparagraph (1) of this paragraph may be illustrated by the 
following example:

    Example. For the taxable year 1960, M, a life insurance company 
which meets the requirements of section 501(c)(9), other than the 
requirement of subparagraph (B) thereof, makes the election under 
section 810(e). Assume the following facts with respect to a policy 
issued in 1955 which voluntarily lapsed during the taxable year:

(1) Life insurance reserve on January 1, 1960................       $600
(2) Amount allowable as a deduction under sec. 809(d)(1).....        200
(3) Decrease in life insurance reserves for sec. 810(e)              400
 purposes (item (1) minus item (2))..........................
(4) Amount taken into account under sec. 810 (a) and (b) by           46
 reason of sec. 810(e) election (11 1/2%x$400)...............



Under the provisions of section 810(e) and subparagraph (1) of this 
paragraph, M would include $46 as its life insurance reserve with 
respect to such policy under section 810(c)(1) at the beginning of the 
taxable year 1960 for purposes of determining the net increase or 
decrease in the sum of the items described in section 810(c) for the 
taxable year under section 810 (a) or (b).

    (b) Time and manner of making election. The election provided by 
section 810(e)(3) shall be made in a statement attached to the life 
insurance company's income tax return for the first taxable year for 
which the company desires the election to apply. The return and 
statement must be filed not later than the date prescribed by law 
(including extensions thereof) for filing the return for such taxable 
year. However, if the last day prescribed by law (including extensions 
thereof) for filing a return for the first taxable year for which the 
company desires the election to apply falls before January 20, 1961, the 
election provided by section 810(e)(3) may be made for such year by 
filing the statement and an amended return for such taxable year (and 
all

[[Page 642]]

subsequent taxable years for which returns have been filed) before April 
21, 1961. The statement shall indicate that the company meets the 
requirements of section 501(c)(9), other than the requirement of 
subparagraph (B) thereof, and has made the election provided under 
section 810(e) and paragraph (a) of this section. The statement shall 
set forth the following information with respect to each policy 
described in paragraph (a) of this section which has voluntarily lapsed 
during such year:
    (1) Type of policy.
    (2) Date issued.
    (3) Date lapsed.
    (4) Reason for lapse.
    (5) Policy reserve as of beginning of taxable year.
    (6) Deduction allowable under section 809(d)(1) and paragraph (a)(1) 
of Sec. 1.809-5 during taxable year by reason of lapse.
    (7) Decrease in policy reserve for section 810(e) purposes (excess 
of (5) over (6)).

In addition, the statement shall set forth the total of the amounts 
referred to in subparagraph (7) of this paragraph with respect to all 
policies described in paragraph (a) of this section which have 
voluntarily lapsed during the taxable year.
    (c) Scope of election. An election made under section 810(e)(3) and 
paragraph (a) of this section shall be effective for the taxable year 
for which made and for all succeeding taxable years, unless consent to 
revoke the election is obtained from the Commissioner. However, for 
taxable years beginning prior to January 20, 1961, a company may revoke 
the election provided by section 810(e)(3) without obtaining consent 
from the Commissioner by filing, before April 21, 1961, a statement that 
the company desires to revoke such election. An amended return 
reflecting such revocation must accompany the statement for all taxable 
years for which returns have been filed with respect to such election.
    (d) Disallowance of carryovers from pre-1958 losses from operations. 
For any taxable year for which the election provided under section 
810(e)(3) and paragraph (b) of this section is effective, the provisions 
of section 812(b)(1) and Sec. 1.812-4 shall not apply with respect to 
any loss from operations for any taxable year beginning before January 
1, 1958.
    (e) Effective date; cross reference. The provisions of section 
810(e) (as in effect for such years) and this section apply only with 
respect to taxable years beginning before January 1, 1970. For 
provisions relating to certain funded pension trusts applicable to 
taxable years beginning after December 31, 1969, see section 501(c)(18) 
and the regulations thereunder.

[T.D. 6535, 26 FR 533, Jan. 20, 1961, as amended by T.D. 7172, 37 FR 
5619, Mar. 17, 1972]