[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: 26CFR1.812-4]

[Page 646-648]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Determination of Tax Liability--Table of Contents
 
Sec. 1.812-4  Operations loss carrybacks and operations loss carryovers.

    (a) In general--(1) Years to which loss may be carried. In order to 
compute the operations loss deduction of a life insurance company the 
company must first determine the part of any losses

[[Page 647]]

from operations for any preceding or succeeding taxable years which are 
carryovers or carrybacks to the taxable year in issue. Except as 
otherwise provided by this paragraph, a loss from operations for taxable 
years beginning after December 31, 1954, shall be carried back to each 
of the 3 taxable years preceding the loss year and shall be carried 
forward to each of the 5 taxable years succeeding the loss year. Except 
as limited by section 812(e)(2) and paragraph (b) of Sec. 1.812-6, if 
the life insurance company is a new company (as defined in section 
812(e)(1)) for the loss year, the loss from operations shall be carried 
back to each of the 3 taxable years preceding the loss year and shall be 
carried forward to each of the 8 taxable years succeeding the loss year. 
In determining the span of years for which a loss from operations may be 
carried, taxable years in which a company does not qualify as a life 
insurance company (as defined in section 801(a)), or is not treated as a 
new company, shall be taken into account.
    (2) Special transitional rules. (i) A loss from operations for any 
taxable year beginning before January 1, 1958, shall not be carried back 
to any taxable year beginning before January 1, 1955. Furthermore, a 
loss from operations for any taxable year beginning after December 31, 
1957, shall not be carried back to any taxable year beginning before 
January 1, 1958.
    (ii) If for any taxable year a life insurance company has made an 
election under section 810(e) (relating to certain decreases in reserves 
for voluntary employees' beneficiary associations) which is effective 
for such taxable year, the provisions of section 812(b)(1) and 
subparagraph (1) of this paragraph shall not apply with respect to any 
loss from operations for any taxable year beginning before January 1, 
1958.
    (3) Illustration of principles. The provisions of section 812(b)(1) 
and of this paragraph may be illustrated by the following examples:

    Example 1. P, a life insurance company, organized in 1940, has a 
loss from operations of $1,000 in 1958. This loss cannot be carried 
back, but shall be carried forward to each of the 5 taxable years 
following 1958.
    Example 2. Q, a life insurance company, organized in 1940, has a 
loss from operations of $1,200 in 1959. This loss shall be carried back 
to the taxable year 1958 and then shall be carried forward to each of 
the 5 taxable years following 1959.
    Example 3. R, a life insurance company, organized in 1940, has a 
loss from operations of $1,300 for the taxable year 1956. This loss 
shall first be carried back to the taxable year 1955 and then shall be 
carried forward to each of the 5 taxable years following 1956. The loss 
for 1956, carryback to 1955, and carryover to 1957 shall each be 
computed as if part I, subchapter L, chapter 1 of the Code (as in effect 
for 1958) applied to such taxable years.
    Example 4. S, a life insurance company, organized in 1958 and 
meeting the provisions of section 812(e) (rules relating to new 
companies), has a loss from operations of $1,400 for the taxable year 
1958. This loss cannot be carried back, but shall be carried forward to 
each of the 8 taxable years following 1958, provided, however, S is not 
a nonqualified corporation at any time during the loss year (1958) or 
any taxable year thereafter.
    Example 5. T, a life insurance company, organized in 1954 and 
meeting the provisions of section 812(e) (rules relating to new 
companies), has a loss from operations of $1,500 for the taxable year 
1956. This loss shall first be carried back to the taxable year 1955 and 
then carried forward to each of the 8 taxable years following 1956, 
provided, however, T is not a nonqualified corporation at any time 
during the loss year (1956) or any taxable year thereafter. The loss for 
1956, carryback to 1955, and carryover to 1957 shall each be computed as 
if part I of subchapter L (as in effect for 1958) applied to such 
taxable years.

    (4) Periods of less than 12 months. A fractional part of a year 
which is a taxable year under sections 441(b) and 7701(a)(23) is a 
preceding or a succeeding taxable year for the purpose of determining 
under section 812 the first, second, etc., preceding or succeeding 
taxable year. For the determination of the loss from operations for 
periods of less than 12 months, see section 818(d) and the regulations 
thereunder.
    (5) Amount of loss to be carried. The amount which is carried back 
or carried over to any taxable year is the loss from operations to the 
extent it was not absorbed in the computation of gain from operations 
for other taxable years, preceding such taxable year, to which it may be 
carried back or carried over. For the purpose of determining the gain 
from operations for any such preceding taxable year, the various 
operations loss carryovers and carrybacks to such taxable year are 
considered to be applied in reduction of

[[Page 648]]

the gain from operations in the order of the taxable years from which 
such losses are carried over or carried back, beginning with the loss 
for the earliest taxable year.
    (6) Corporate acquisitions. For the computation of the operations 
loss carryovers in the case of certain acquisitions of the assets of a 
life insurance company by another life insurance company, see section 
381(c)(22) and the regulations thereunder.
    (b) Portion of loss from operations which is a carryback or a 
carryover to the taxable year in issue--(1) Manner of computation. (i) A 
loss from operations shall first be carried back to the earliest taxable 
year permissible under section 812(b) and paragraph (a) of this section 
for which such loss is allowable as a carryback or a carryover. The 
entire amount of the loss from operation shall be carried back to such 
earliest year.
    (ii) Section 812(b)(2) provides that the portion of the loss from 
operations which shall be carried to each of the taxable years 
subsequent to the earliest taxable year shall be the excess (if any) of 
the amount of the loss from operations over the sum of the offsets (as 
defined in section 812(d) and paragraph (a) of Sec. 1.812-5) for all 
prior taxable years to which the loss from operations may be carried.
    (2) Illustration of principles. The application of this paragraph 
may be illustrated by the following example:

    Example. T, a life insurance company (which is not a new company as 
defined in section 812(e)(1)), has a loss from operations for 1960. The 
entire amount of the loss from operations for 1960 shall first be 
carried back to 1958. The amount of the carryback to 1959 is the excess 
(if any) of the 1960 loss over the offset for 1958. The amount of the 
carryover to 1961 is the excess (if any) of the 1960 loss over the sum 
of the offsets for 1958 and 1959. The amount of the 1960 loss remaining 
(if any) to be carried over to 1962, 1963, or 1964 shall be computed in 
a like manner.

[T.D. 6535, 26 FR 537, Jan. 20, 1961]