[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: 26CFR1.825-1]

[Page 722-723]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Determination of Tax Liability--Table of Contents
 
Sec. 1.825-1  Unused loss deduction; in general.

    (a) Amount of deduction. Section 825(a) provides that the unused 
loss deduction of a mutual insurance company subject to the tax imposed 
by section 821(a) shall be an amount equal to the sum of the unused loss 
carryovers and carrybacks to the taxable year. The amount so determined 
is used in the computation of mutual insurance company taxable income 
for the taxable year. See section 821(b) and Sec. 1.821-4.
    (b) Unused loss defined. Section 825(b) defines the term ``unused 
loss'' as the amount (if any) by which:
    (1) The sum of the statutory underwriting loss (as defined in 
section 823(a)(2)) and the investment loss (as defined in section 
822(a)(2)) exceeds
    (2) The sum of:
    (i) The taxable investment income (as defined in section 822(a)(1)),
    (ii) The statutory underwriting income (as defined in section 
823(a)(1)), and
    (iii) The amounts required to be subtracted from the protection 
against loss account under section 824(d).
    (c) Steps in computation of unused loss deduction. The three steps 
to be taken in the ascertainment of the unused loss deduction for any 
taxable year are as follows:

[[Page 723]]

    (1) Compute the unused loss for any preceding or succeeding taxable 
year from which an unused loss may be carried over or carried back to 
the taxable year.
    (2) Compute the unused loss carryovers to the taxable year from such 
preceding taxable years and the unused loss carrybacks to the taxable 
year from such succeeding taxable years.
    (3) Add such unused loss carryovers and carrybacks in order to 
determine the unused loss deduction for the taxable year.
    (d) Statement with tax return. Every mutual insurance company 
taxable under section 821(a) claiming an unused loss deduction for any 
taxable year shall file with its return for such year a concise 
statement setting forth the amount of the unused loss deduction claimed 
and all material and pertinent facts relative thereto, including a 
detailed schedule showing the computation of the unused loss deduction.
    (e) Ascertainment of deduction dependent upon unused loss carryback. 
If a mutual insurance company taxable under section 821(a) is entitled 
in computing its unused loss deduction to a carryback which it is not 
able to ascertain at the time its return is due, it shall compute the 
unused loss deduction on its return without regard to such unused loss 
carryback. When the company ascertains the unused 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 unused 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.
    (f) Law applicable to computations. The following rules shall apply 
to taxable years for which the taxpayer is subject to the tax imposed by 
section 821(a):
    (1) In determining the amount of any unused 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 unused loss 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 unused loss deduction.
    (3) The amount of the unused loss deduction which shall be allowed 
for any taxable year shall be determined under the law applicable for 
that year.

[T.D. 6681, 28 FR 11122, Oct. 17, 1963]