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TITLE 26-INTERNAL REVENUE CODE ferred or credited from a branch account es- tablished pursuant to subsection (c) to one or more other accounts of such company shall, unless such transfer or credit is a re- imbursement to which paragraph (1) ap- plies, be added to the life insurance compa- ny taxable income of the domestic life in- surance company (as computed without regard to this paragraph). (B) Limitation The addition provided by subparagraph (A) for the taxable year with respect to any contiguous country life insurance branch shall not exceed the amount by which- (i) the aggregate decrease in the life in- surance company taxable income of the domestic life insurance company for the taxable year and for all prior taxable years resulting solely from the application of subsection (a) of this section with re- spect to such branch, exceeds (ii) the amount of additions to life in- surance company taxable income pursu- ant to subparagraph (A) with respect to such contiguous country branch for all prior taxable years. (f) Other rules (I) Treatment of foreign taxes (A) In general No income, war profits, or excess profits taxes paid or accrued to any foreign coun- try or possession of the United States which is attributable to income excluded under subsection (a) shall be taken into account for purposes of subpart A of part III of sub- chapter N (relating to foreign tax credit) or allowable as a deduction. (B) Treatment of repatriated amounts For purposes of sections 78 and 902, where any amount is added to the life in- surance company taxable income of the do- mestic life insurance company by reason of subsection (e)(2), the contiguous country life insurance branch shall be treated as a foreign corporation. Any amount so added shall be treated as a dividend paid by a for- eign corporation, and the taxes paid to any foreign country or possession of the United States with respect to such amount shall be deemed to have been paid by such branch. (2) United States source income allocable to contig- uous country branch For purposes of sections 881, 882, and 1442, each contiguous country life insurance branch shall be treated as a foreign corpora- tion. Such sections shall be applied to each such branch in the same manner as If such sections contained the provisions of any treaty to which the United States and the contiguous country are parties, to the same extent such provisions would apply if such branch were incorporated in such contiguous country. (g) Election A taxpayer may make the election provided by this subsection with respect to any contig- uous country for any taxable year beginning after December 31, 1975. An election made under this subsection for any taxable year shall remain in effect for all subsequent taxable years, except that it may be revoked with the consent of the Secretary. The election provided by this subsection shall be made not later than the time prescribed by law for filing the return for the taxable year (including extensions thereof) with respect to which such election is made, and such election and any approved revo- cation thereof shall be made in the manner provided by the Secretary. (h) Special rule for domestic stock life insurance companies At the election of a domest!c stock life insur- ance company which has a contiguous country life insurance branch described in subsection (b) (without regard to the mutual requirement in subsection (b)(3)), the assets of such branch may be transferred to a foreign corporation or- ganized under the laws of the contiguous coun- try without the application of section 367 or 1491. Subsection (a) shall apply to the stock of such foreign corporation as if such domestic company were a mutual company and as if the stock were an item described in subsection (c). Subsection (e)(2) shall apply to amounts trans- ferred o, credited to such domestic company as if such domestic company and such foreign cor- poration constituted one domestic mutual life insurance company. The insurance contracts which may be transferred pursuant to this sub- section shall include only those which are simi- lar to the types of insurance contracts issued by a mutual life insurance company. Notwith- standing the first sentence of this subsection, if the aggregate fair market value of the invested assets and tangible property which are sepa- rately accounted for by the domestic life insur- ance company in the branch account exceeds the aggregate adjusted basis of such assets for purposes of determining gain, the domestic life insurance company shall be deemed to have sold all such assets on the first day of the tax- able year for which the election under this sub- section applies and the net gain shall be recog- nized to the domestic life insurance company on the deemed sale, but not in excess of the proportion of such net gain which equals the proportion which the aggregate fair market value of such assets which are transferred pur- suant to this subsection is of the aggregate fair market value of all such assets. (Added Pub. L. 94-455, title X, § 1043(a), Oct. 4, 1976, 90 Stat. 1639.) EFFECTIVE DATE Section 1043(c) of Pub. L. 94-455 provided that: "The amendment made by this section [enacting this section] shall apply to taxable years beginning after December 31, 1975". § 820. Optional treatment of policies reinsured under modified coinsurance contracts (a) In general (1) Treatment as reinsured under conventional co- insurance contract Under regulations prescribed by the Secre- tary, an insurance or annuity policy reinsured under a modified coinsurance contract (as de- fined in subsection (b)) shall be treated, for purposes of this part (other than for purposes of section 801). as if such policy were rein- Page 518 § 820