PUBLIC LAW 97-248—SEPT. 3, 1982 SEC.
256. SPECIAL ACCOUNTING SECTION 820.
RULES
RELATING
TO REPEAL
96 STAT. 535 OF
(a) IN GENERAL. — For purposes of subchapter L of chapter 1 of the I n t e r n a l Revenue Code of 1954, the provisions of this section shall apply to any contract— (1) which was in effect on December 31, 1981, and (2) to which section 820(a)(1) of such Code (as in effect before its repeal by section 255(a)) applied. (b) T R E A T M ENT OF RESERVES AND ASSETS.—Except as provided in
subsections (c) and (d), the reserves on the contract described in subsection (a) and the assets in relation to such reserves shall— (1) as of the beginning of taxable year 1982, be treated as the reserves and assets of the reinsurer (and not the reinsured), and (2) as of the e n d of taxable year 1982, be treated as the reserves and assets of the reinsured (and not the reinsurer). (c) ALLOCATION OF CERTAIN SECTION 820(c) I T E M S. — Any a m o u n t
described in paragraph s (1), (2), (4), and (5) of section 820(c) of such Code (as so in effect) with respect to any contract described in subsection (a) shall, beginning with taxable year 1982, be t a k e n into account by the reinsured and the reinsurer in the same m a n n e r as such a m o u n t s would be t a k e n into account under a modified coinsurance contract to which section 820(a)(1) of such Code (as so in effect) does not apply. (d) A M O U N T S TREATED AS R E T U R N E D U N D E R THE CONTRACT.—
(1) IN GENERAL.—For taxable year 1982— (A) in the case of the reinsurer, the r e shall be allowed as a deduction for ordinary and necessary business expenses under section 809(d)(ll) of such Code a n a m o u n t equal to the termination a m o u n t (and such a m o u n t shall not otherwise be t a k e n into account in determining gain or loss from operations under section 809 of such Code), and (B) in the case of the reinsured, the gross a m o u n t under section 809(c)(3) of such Code shall be increased by the termination amount. (2) ADJUSTMENT FOR RESERVES OF REINSURED.—For purposes of
subsections (a) and (b) of section 810 of such Code, the a m o u n t t a k e n into account as of the close of taxable year 1982 by the reinsured shall be reduced for such taxable year (but not for purposes of determining such a m o u n t a t the beginning of the next succeeding taxable year) by the excess (if any) of— (A) the reserves on the contract as of January 1, 1982 (determined under the reinsured's method of computing reserves for tax purposes), over (B) the termination a m o u n t. This paragraph shall not apply to any portion of any policies with respect to which the tax p a y e r is both the reinsured and the reinsurer under contracts to which this section applies. (3) TERMINATION A M O U N T. — For purposes of t h i s subsection,
the term "termination amount" means the amount under the contract which the reinsurer would have r e t u r n e d to the reinsured upon termination of the contract if the contract h a d been term i n a t e d as of January 1, 1982. (4) CERTAIN AMOUNTS NOT TAKEN INTO ACCOUNT UNDER SEC-
TION 809(d)(5).—Any a m o u n t treated as the reserves of the reinsured by reason of subsection (b)(2) shall not be t a k e n into
97-200 O—84—pt, 1
19: QL3
26 USC 809 note.
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