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 ------------------------------------------------------------------------                                              Attributable  Attributable                                Attributable       to        to insuring             Item                  to all      reinsuring      foreign                                  insurance    U.S. risks       risks------------------------------------------------------------------------Investment Income:  (1) Investment yield under         $90,000   Unallocable   Unallocable   section 804(c).............  (2) Sum of the mean of each      2,500,000    $1,000,000    $1,500,000   of the items described in   section 810(c) at beginning   and end of 1963............  (3) Required interest under         60,000        25,000        35,000   section 809(a)(2)..........  (4) Deductions allowed under        10,000   Unallocable   Unallocable   section 809(d)(8), (9), and   (12) which relate to gross   investment income..........Underwriting Income:  (5) Premiums under section         600,000       200,000       400,000   809(c)(1)..................  (6) Net decrease in reserves        10,000          None        10,000   under section 809(c)(2)....  (7) Net increase in reserves        40,000        40,000          None   under section 809(d)(2)....  (8) Deductions allowed under   section 809(d) (other than   deduction allowed under   section 809(d)(2) and other   than those deductions   allowed under section   809(d)(8), (9), and (12)   which relate to gross   investment income):    (i) Allocable.............       330,000       110,000       220,000    (ii) Unallocable..........        60,000   Unallocable   Unallocable------------------------------------------------------------------------
  (b) The unallocable investment yield ($90,000) under paragraph (a)(1) of this example and the unallocable deductions ($10,000) under paragraph (a)(4) relating to gross investment income are apportioned to the reinsuring of United States risks under paragraph (f)(1)(i) of this section in the amounts of $36,000, and $4,000, respectively, determined as follows:
   (1) Sum of the mean of each of the items described in         $1,000,000 section 810(c) at beginning and end of 1963, attributable to reinsuring U.S. risks (paragraph (a)(2))................(2) Sum of the mean of each of the items described in         $2,500,000 section 810(c) at beginning and end of 1963, attributable to all insurance (paragraph (a)(2))........................(3) Ratio of amount under subparagraph (1) to amount under           40% subparagraph (2) ($1,000,000/$2,500,000)...................(4) Amount of investment yield attributable to reinsuring of     $36,000 U.S. risks (40% of $90,000)................................(5) Amount of such deductions attributable to reinsuring of       $4,000 U.S. risks (40% of $10,000)................................ 
  (c) The unallocable deductions ($60,000) under paragraph (a)(8)(ii) of this example which do not relate to gross investment income are apportioned to the reinsuring of United States risks under paragraph (f)(2)(ii) of this section in the amount of $16,800, determined as follows:

(1) The numerator determined under paragraph (f)(2)(ii)(b) of this section is $160,000, determined as follows:

   (i) Premiums under section 809(c)(1)               $200,000 attributable to reinsuring U.S. risks (paragraph (a)(5))...........................(ii) Plus: Net decrease in reserves under       ...........     $200,000 section 809(c)(2) attributable to reinsuring U.S. risks (paragraph (a)(6))................                                                            ------------(iii) Less: Net increase in reserves under section               $40,000 809(d)(2) attributable to reinsuring U.S. risks (paragraph (a)(7))...................................................                                                            ------------                                                ...........     $160,000 
  (2) The denominator determined under paragraph (f)(2)(ii)(c) of this section is $570,000, determined as follows:
   (i) Premiums under section 809(c)(1)               $600,000 attributable to all insurance (paragraph (a)(5))......................................(ii) Plus: Net decrease in reserves under            10,000 section 809(c)(2) attributable to all insurance (paragraph (a)(6)).................                                               --------------                                                ...........     $610,000(iii) Less: Net increase in reserves under section                40,000 809(d)(2) attributable to all insurance (paragraph (a)(7))                                                            ------------                                                ...........     $570,000 
  (3) Ratio which the numerator determined under subparagraph (1) bears to the denominator determined under subparagraph (2) ($160,000/$570,000)—28%.

(4) Amount of deductions attributable to reinsuring of U.S. risks (28% of $60,000)—$16,800.

(d) The taxable income of A Corporation for 1963 which constitutes its income derived from the insurance of United States risks for purposes of paragraph (a) of §1.953–1 is $40,200, determined as follows:

 ----------------------------------------------------------------------------------------------------------------                                                 Attributable to all     Attributable to       Attributable to                                                      insurance          reinsuring U.S.      insuring foreign                                               ----------------------         risks                 risks                                                                     ------------------------------------------- ----------------------------------------------------------------------------------------------------------------Item:  (1) Investment yield under section 804(c)       $90,000  .........    $36,000  .........    $54,000   (paragraph (a)(1), unallocable but as   apportioned under paragraph (b)(4).........  (2) Less: Required interest under section        60,000  .........     25,000  .........     35,000   809(a)(2) (paragraph (a)(3))...............                                               -----------           -----------           -----------  (3) Life insurance company's share of         .........    $30,000  .........    $11,000  .........    $19,000   investment yield under section 809(b)(1)(A)Plus sum of:  (4) Premiums under section 809(c)(1)            600,000  .........    200,000  .........    400,000   (paragraph (a)(5)).........................  (5) Net decrease in reserves under section       10,000    610,000       None    200,000     10,000    410,000   809(c)(2) (paragraph (a)(6))...............                                               -----------------------------------------------------------------     Sum determined under section 809(b)(1)...  .........    640,000  .........    211,000  .........    429,000Less sum of:  (6) Net increase in reserves under section       40,000  .........     40,000  .........       None   809(d)(2) (paragraph (a)(7))...............  (7) Deductions allowed under section             10,000  .........      4,000  .........      6,000   809(d)(8), (9), and (12) which relate to   gross investment income (paragraph (a)(4)),   unallocable but as apportioned under   paragraph (b)(5)...........................  (8) Deductions allowed under section 809(d)   (other than deduction allowed under section   809(d)(2) and other than those deductions   allowed under section 809(d)(8), (9), and   (12) which relate to gross investment   income) (paragraph (a)(8)):................    (i) Allocable.............................    330,000  .........    110,000  .........    220,000    (ii) Unallocable, but as apportioned under     60,000    440,000     16,800    170,800     43,200    269,200     paragraph (c)(4).........................                                               -----------------------------------------------------------------     Gain from operations.....................  .........    200,000  .........     40,200  .........    159,800----------------------------------------------------------------------------------------------------------------

[T.D. 6781, 29 FR 18207, Dec. 23, 1964]

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