[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: 26CFR1.812-2]

[Page 645-646]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Determination of Tax Liability--Table of Contents
 
Sec. 1.812-2  Operations loss deduction.

    (a) Allowance of deduction. Section 812 provides that a life 
insurance company shall be allowed a deduction in computing gain or loss 
from operations for any taxable year beginning after December 31, 1957, 
in an amount equal to the aggregate of the operations loss carryovers 
and operations loss carrybacks to such taxable year. This deduction is 
referred to as the operations loss deduction. The loss from operations 
(computed under section 809), is the basis for the computation of the 
operations loss carryovers and operations loss carrybacks and ultimately 
for the operations loss deduction itself. Section 809(e)(5) provides 
that the net operating loss deduction provided in section 172 shall not 
be allowed a life insurance company since the operations loss deduction 
provided in section 812 and this paragraph shall be allowed in lieu 
thereof.
    (b) Steps in computation of operations loss deduction. The three 
steps to be taken in the ascertainment of the operations loss deduction 
for any taxable year beginning after December 31, 1957, are as follows:
    (1) Compute the loss from operations for any preceding or succeeding 
taxable year from which a loss from operations may be carried over or 
carried back to such taxable year.
    (2) Compute the operations loss carryovers to such taxable year from 
such preceding taxable years and the operations loss carrybacks to such 
taxable year from such succeeding taxable years.
    (3) Add such operations loss carryovers and carrybacks in order to 
determine the operations loss deduction for such taxable year.
    (c) Statement with tax return. Every life insurance company claiming 
an operations loss deduction for any taxable year shall file with its 
return for such year a concise statement setting forth the amount of the 
operations loss deduction claimed and all material and pertinent facts 
relative thereto, including a detailed schedule showing the computation 
of the operations loss deduction.
    (d) Ascertainment of deduction dependent upon operations loss 
carryback. If a life insurance company is entitled in computing its 
operations loss deduction to a carryback which it is not able to 
ascertain at the time its return is due, it shall compute the operations 
loss deduction on its return without regard to such operations loss 
carryback. When the life insurance company ascertains the operations 
loss carryback, it may within the applicable period of limitations file 
a claim for credit or refund of the overpayment, if any, resulting from 
the failure to compute the operations loss deduction for the taxable 
year with the inclusion of such carryback; or it may file an application 
under the provisions of section 6411 for a tentative carryback 
adjustment.
    (e) Law applicable to computations. The following rules shall apply 
to all taxable years beginning after December 31, 1957:
    (1) In determining the amount of any operations loss carryback or 
carryover to any taxable year, the necessary computations involving any 
other taxable year shall be made under the law applicable to such other 
taxable year.
    (2) The loss from operations for any taxable year shall be 
determined under the law applicable to that year without regard to the 
year to which it is to be carried and in which, in effect, it is to be 
deducted as part of the operations loss deduction.
    (3) The amount of the operations loss deduction which shall be 
allowed for

[[Page 646]]

any taxable year shall be determined under the law applicable for that 
year.
    (f) Special rules. For purposes of taxable years beginning after 
December 31, 1954, and before January 1, 1958:
    (1) The amount of any:
    (i) Loss from operations;
    (ii) Operations loss carryback; and
    (iii) Operations loss carryover

shall be computed as if part I, subchapter L, chapter 1 of the Code (as 
in effect for 1958) and section 381(c)(22) applied to such taxable 
years.
    (2) A loss from operations (determined in accordance with the 
provisions of section 812(b)(1)(C) and this paragraph) for such taxable 
years shall in no way affect the tax liability of any life insurance 
company for such taxable years. However, such loss may, to the extent 
allowed as an operations loss carryover under section 812, affect the 
tax liability of a life insurance company for a taxable year beginning 
after December 31, 1957. For example, for the taxable year 1956, X, a 
life insurance company, has a loss from operations (determined in 
accordance with the provisions of section 812(b)(1)(C) and this 
paragraph). Such loss shall in no way affect X's tax liability for the 
taxable years 1956 (the year of the loss), 1955 (a year to which such 
loss shall be carried back), or 1957 (a year to which such loss shall be 
carried forward). However, to the extent allowed under section 812, any 
amount of the loss for 1956 remaining after such carryback and 
carryforward shall be taken into account in determining X's tax 
liability for taxable years beginning after December 31, 1957.

[T.D. 6535, 26 FR 536, Jan. 20, 1961]