Page 500

TITLE 26-INTERNAL REVENUE CODE (2) Real estate expenses The amount of taxes (as provided in section 164), and other expenses, for the taxable year exclusively on or with respect to the real estate owned by the company. No deduction shall be allowed under this paragraph for any amount paid out for new buildings, or for per- manent improvements or betterments made to increase the value of any property. (3) Depreciation The deduction allowed by section 167. The deduction under this paragraph and para- graph (2) on account of any real estate owned and occupied for insurance purposes 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 with- out regard to this sentence) as the rental value of the space not so occupied bears to the rental value of the entire property. (4) Depletion The deduction allowed by section 611 (relat- ing to depletion). (5) Trade or business deductions The deductions allowed by this subtitle (without regard to this part) which are attrib- utable to any trade or business (other than an insurance business) carried on by the life in- surance company, or by a partnership of which the life insurance company is a part- ner; except that in computing the deduction under this paragraph- (A) There shall be excluded losses- (i) from (or considered as from) sales or exchanges of capital assets, (ii) from sales or exchanges of property used in the trade or business (as defined in section 1231(b)), and (iii) from the compulsory or involuntary conversion (as a result of destruction, in whole or in part, theft or seizure, or an exercise of the power of requisition or condemnation or the threat or imminence thereof) of property used in the trade or business (as so defined). (B) Any item, to the extent attributable to the carrying on of the insurance busi- ness, shall not be taken into account. (C) The deduction for net operating losses provided in section 172, and the special de- ductions for corporations provided in part VIII of subehapter B, shall not be allowed. (d) Cross reference For reduction of the $25,000 amount provided in sub- section (a)(4) in the case of certain controlled corpora- tions, see sections 1561 and 1561. (Added Pub. L. 86-69, § 2(a), June 25, 1959, 73 Stat. 115, and amended Pub. L. 87-858, § 3(b)(2), Oct. 23, 1962, 76 Stat. 1137; Pub. L. 88-272, title II, § 214(b)(3), Feb. 26, 1964, 78 Stat. 55; Pub. L. 91-172, title IV, § 401(b)(2)(D), Dec. 30, 1969, 83 Stat. 602; Pub. L. 94-455, title XIX, § 1901(a)(96), (b)(1)(J)(i), (iii), (K), (M), (33)(F), Oct. 4, 1976, 90 Stat. 1780, 1791, 1801.) PRIOR PROVISIONS A prior section 804, acts Aug. 16, 1954, ch. 736, 68A Stat. 258; Mar. 13, 1956, ch. 83, § 2, 70 Stat. 41, related to reserve and other policy liability deductions prior to the general revision of this part by Pub. L. 86-69, § 2(a). Provisions similar to those comprising this section were contained in former section 803 of this title. AMENDMENTS 1976-Subsec. (a)(1). Pub. L. 94-455, § 1901(b)(1)(M), struck out ", partially tax-exempt interest," following "(including tax-exempt interest". Subsec. (a)(2). Pub. L. 94-455, § 1901(b)(1)(M), (33)(F), substituted "of the net capital gain" for "by which the net long-term capital gain exceeds the net short-term capital loss" and struck out ", partially tax- exempt interest," following "(including tax-exempt in- terest". Subsec. (a)(2)(A). Pub. L. 94-455, § 1901(b)(1)(J)(ii), (K), redesignated former cl. (iii) as (ii), and as so rede- signated, substituted "paragraph (4)" for "paragraph (5)". Former cl. (ii), which related to the deduction for partially tax-exempt interest provided by section 242 of this title. Subsec. (a)(2)(B). Pub. L. 94-455, § 1901(b)(1)(J)(ii), substituted "paragraph (3)" for "paragraph (4)". Subsecs. (a)(3), (4). Pub. L. 94-455, § 1901(b)(l)(J)(i), redesignated former subsec. (a)(4) and (5) as (a)(3) and (4). Former subsec. (a)(3), which related to partially tax-exempt interest, was struck out. Subsec. (al(5). Pub. L. 94-455, § 1901(b)(1)(J)(i), rede- signated subsec. (a)(5) as (a)(4). Subsec. (a)(6). Pub. L. 94-455, § 1901(a)(96)(A), struck out subsec. (a)(6) which related to exception to taxable investment income. Subsec. (b)(2). Pub. L. 94-455, § 1901(a)(96)(B), sub- stituted "The" for "In the case of a taxable year be- ginning after December 31, 1958, the". 1969-Subsec. d). Pub. L. 91-172 added subsec. (d. 1964-Subsec. (a)(5). Pub. L. 88-272 substituted "243(a)(1), 244(a)" for "243(a), 244". 1962-Subsec. (a)(2). Pub. L. 87-858 substituted "equal to the amount (if any) by which the net long- term capital gain exceeds the net short-term capital loss plus the sum" for "equal to the sum". EFFECTIVE DATE OF 1976 AMENDMENT Amendment of subsecs. (a) and (b) by section 1901 of Pub. L. 94-455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94- 455, set out as an Effective Date of 1976 Amendment note under section 2 of this title. EFFECTIVE DATE OF 1969 AMENDMENT Subsec. (d) of this section applicable with respect to taxable years beginning after Dec. 31, 1969, see section 401(h)(2) of Pub. L. 91-172, set out as an Effective Date of 1969 Amendment note under section 1561 of this title. EFFECTIVE DATE OF 1964 AMENDMENT Amendment by Pub. L. 88-272 applicable to divi- dends received in taxable years ending after Dec. 31, 1963, see section 214(c) of Pub. L. 88-272, set out as an Effective Date of 1964 Amendment note under section 243 of this title. EFFECTIVE DATE OF 1962 AMENDMENT Amendment by Pub. L. 87-858 applicable with re- spect to taxable years beginning after Dec. 31, 1961, see section 3(f) of Pub. L. 87-858, set out as an Effec- tive Date of 1962 Amendment note under section 801 of this title. EFFECTIVE DATE Section applicable only with respect to taxable years beginning after Dec. 31, 1057, see section 4 of Pub. L. 86-69, set out as an Effective Date note under section 801 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 243, 801, 802, 1561, 1564 of this title. § 804 Page 500