[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: 26CFR1.823-7]

[Page 722]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Determination of Tax Liability--Table of Contents
 
Sec. 1.823-7  Subscribers of reciprocal underwriters and interinsurers.

    A subscriber or policyholder of a reciprocal underwriter or 
interinsurer entitled to the deduction allowed by section 823(b)(2) and 
paragraph (c)(2) of Sec. 1.823-6 shall treat amounts representing 
savings credit to his individual account for the taxable year as a 
dividend paid or declared for purposes of computing his taxable income. 
If a reciprocal credits savings to subscriber accounts after the close 
of its taxable year, but before the 16th day of the third month 
following the close of the taxable year, and the reciprocal takes such 
credits into account as if they had been made on the last day of its 
taxable year, the subscribers of such reciprocal must take such savings 
into account as if they had in fact been credited on the last day of the 
company's taxable year. The subscriber shall take savings credited to 
his account into account without regard to whether the amounts credited 
are actually distributed to him in cash. To the extent the insurance 
premium constituted a deductible expense when paid or accrued, the 
subscriber's taxable income for the taxable year will be increased and 
any loss for the taxable year will be decreased, by the amount credited 
to his account. Amounts credited to a subscriber's account which are 
taken into income by him and which subsequently are used to absorb 
losses of the reciprocal shall be treated by the subscriber as an 
additional insurance expense for the taxable year in which the amounts 
are absorbed. Such amounts may be deducted in computing taxable income 
to the extent insurance constitutes an otherwise properly deductible 
expense for such taxable year.

[T.D. 6681, 28 FR 11118, Oct. 17, 1963]