56 STAT.] 77TH CONG., 2D SESS.-CH. 619-OCT. 21, 1942 or annuity contracts) which do not involve, at the time of payment, life, health, or accident contingencies. (7) NET INCOME.- The term 'net income' means the gross income less- "(A) Tax-free Interest. -The amount of interest received during the taxable year which under section 22 (b) (4) is excluded from gross income; "(B) Investment Expenses. - Investment expenses paid during the taxable year. If any general expenses are in part assigned to or included in the investment expenses, the total deduction under this subparagraph shall not exceed one-fourth of 1 per centum of the mean of the book value of the invested assets held at the beginning and end of the taxable year plus one-fourth of the amount by which net income computed without any deduction for investment expenses allowed by this subparagraph, or for tax-free interest allowed by subparagraph (A), exceeds 34 per centum of the book value of the mean of the invested assets held at the beginning and end of the taxable year; "(C) Real Estate Expenses.-Taxes and other expenses paid during the taxable year exclusively upon or with respect to the real estate owned by the company, not includ- ing taxes assessed against local benefits of a kind tending to increase the value of the property assessed, and not includ- ing any amount paid out for new buildings, or for perma- nent 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 share- holder, which are paid by the company without reimburse- ment from the shareholder, but in such cases no deduction shall be allowed the shareholder for the amount of such taxes; "(D) Depreciation. -A reasonable allowance, as pro- vided in section 23 (1), for the exhaustion, wear and tear of property, including a reasonable allowance for obsolescence. "(d) RENTAL VALUE OF REAL ESTATE. -The deduction under sub- section (c) (7) (C) or (c) (7) (D) of this section on account of any real estate owned and occupied in whole or in part by a life insur- ance 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. "(e) AMORTIZATION OF PREMIUM AND ACCRUAL OF DIsCOUNT.-The gross income, the deduction provided in section 201 (c) (7) (A) and the credit allowed against net income in section 26 (a) shall each be decreased by the appropriate amortization of premium and increased by the appropriate accrual of discount attributable to the taxable year on bonds, notes, debentures or other evidences of indebtedness held by a life insurance company. Such amortization and accrual shall be determined (1) in accordance with the method regularly employed by such company, if such method is reasonable, and (2) in all other cases, in accordance with regulations prescribed by the Commissioner with the approval of the Secretary. "(f) DOUBLE DEDUCTIONS.-Nothing in this section or in section 202 or 203 shall be construed to permit the same items to be twice deducted. 869 63 Stat. 10 . 26U..C.C 22(b) (4). Ante, p. 811. 53 Stat. 14. 26U. . c. z23(0. Ante, p. 819. Supre. (8 Stat. 18 6U. .C. I 6(a) Anit, p. 82. Poi, p. 8.
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