CODIFICATION OF INTERNAL REVENUE LAWS (2) RESERVE FUNDs.- An amount equal to 4 per centum of the mean of the reserve funds required by law and held at the be- ginning and end of the taxable year, except that in the case of any such reserve fund which is computed at a lower interest assumption rate, the rate of 33/4 per centum shall be substituted for 4 per centum. Life insurance companies issuing policies covering life, health, and accident insurance combined in one policy issued on the weekly premium payment plan, continuing for life and not subject to cancellation, shall be allowed, in addition to the above, a deduction of 3/4 per centum of the mean of such reserve funds (not required by law) held at the beginning and end of the taxable year, as the Commissioner finds to be necessary for the protection of the holders of such policies only; (3) RESERVE FOR DIVIDENDS. - An amount equal to 2 per centum of any sums held at the end of the taxable year as a reserve for dividends (other than dividends payable during the year follow- ing the taxable year) the payment of which is deferred for a period of not less than five years from the date of the policy contract; (4) INVESTMENT ExPENSES. -Investment expenses paid during the taxable year: Provided, That if any general expenses are in part assigned to or included in the investment expenses, the total deduction under this paragraph shall not exceed one-fourth of 1 per centum of the book value of the mean of the invested assets held at the beginning and end of the taxable year; (5) REAL ESTATE EXPENSES.- Taxes and other expenses paid dur- ing the taxable year exclusively upon or with respect to the real estate owned by the company, not including taxes assessed against local benefits of a kind tending to increase the value of the prop- erty assessed, and not including any amount paid out for new buildings, or for permanent improvements or betterments made to increase the value of any property. The deduction allowed by this paragraph shall be allowed in the case of taxes imposed upon a shareholder of a company upon his interest as shareholder, which are paid by the company without reimbursement from the share- holder, but in such cases no deduction shall be allowed the share- holder for the amount of such taxes; (6) DEPRECIATION.- A reasonable allowance, as provided in sec- tion 23 (1), for the exhaustion, wear and tear of property, including a reasonable allowance for obsolescence; and (7) INTE}lEST. -A ll interest paid within the taxable year on its indebtedness, except on indebtedness incurred or continued to pur- chase or carry obligations (other than obligations of the United States issued after September 24, 1917, and originally subscribed for by the taxpayer) the interest upon which is wholly exempt from taxation under this chapter. (b) RENTAL VALUE OF REAL ESTATE.- The deduction under sub- section (a) (5) or (6) of this section on account of any real estate owned and occupied in whole or in part by a life insurance company, shall be limited to an amount which bears the same ratio to such deduction (computed without regard to this subsection) as the rental value of the space not so occupied bears to the rental value of the entire property. SEC. 204 . INSURANCE COMPANIES OTHER THAN LIFE OR MUTUAL (a) IMPOSITION oF TAX. - (1) IN GENERAL.- In lieu of the tax imposed by sections 13 and 14, there shall be levied, collected, and paid for each taxable year upon the special class net income of every insurance company (other than a life or mutual insurance company) a tax of 161/2 per centum of the amount thereof. (2) SPECIAL CLASS NET INCOME OF FOREIGN COMPANIES.-In the case of a foreign insurance company (other than a life or mutual in- 72
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