26 C.F.R. § 1.825-1 Unused loss deduction; in general.
Title 26 - Internal Revenue
(a) Amount of deduction. Section 825(a) provides that the unused loss deduction of a mutual insurance company subject to the tax imposed by section 821(a) shall be an amount equal to the sum of the unused loss carryovers and carrybacks to the taxable year. The amount so determined is used in the computation of mutual insurance company taxable income for the taxable year. See section 821(b) and §1.821–4. (b) Unused loss defined. Section 825(b) defines the term “unused loss” as the amount (if any) by which: (1) The sum of the statutory underwriting loss (as defined in section 823(a)(2)) and the investment loss (as defined in section 822(a)(2)) exceeds (2) The sum of: (i) The taxable investment income (as defined in section 822(a)(1)), (ii) The statutory underwriting income (as defined in section 823(a)(1)), and (iii) The amounts required to be subtracted from the protection against loss account under section 824(d). (c) Steps in computation of unused loss deduction. The three steps to be taken in the ascertainment of the unused loss deduction for any taxable year are as follows: (1) Compute the unused loss for any preceding or succeeding taxable year from which an unused loss may be carried over or carried back to the taxable year. (2) Compute the unused loss carryovers to the taxable year from such preceding taxable years and the unused loss carrybacks to the taxable year from such succeeding taxable years. (3) Add such unused loss carryovers and carrybacks in order to determine the unused loss deduction for the taxable year. (d) Statement with tax return. Every mutual insurance company taxable under section 821(a) claiming an unused loss deduction for any taxable year shall file with its return for such year a concise statement setting forth the amount of the unused loss deduction claimed and all material and pertinent facts relative thereto, including a detailed schedule showing the computation of the unused loss deduction. (e) Ascertainment of deduction dependent upon unused loss carryback. If a mutual insurance company taxable under section 821(a) is entitled in computing its unused loss deduction to a carryback which it is not able to ascertain at the time its return is due, it shall compute the unused loss deduction on its return without regard to such unused loss carryback. When the company ascertains the unused loss carryback, it may within the applicable period of limitations file a claim for credit or refund of the overpayment, if any, resulting from the failure to compute the unused loss deduction for the taxable year with the inclusion of such carryback; or it may file an application under the provisions of section 6411 for a tentative carryback adjustment. (f) Law applicable to computations. The following rules shall apply to taxable years for which the taxpayer is subject to the tax imposed by section 821(a): (1) In determining the amount of any unused loss carryback or carryover to any taxable year, the necessary computations involving any other taxable year shall be made under the law applicable to such other taxable year. (2) The unused loss for any taxable year shall be determined under the law applicable to that year without regard to the year to which it is to be carried and in which, in effect, it is to be deducted as part of the unused loss deduction. (3) The amount of the unused loss deduction which shall be allowed for any taxable year shall be determined under the law applicable for that year. [T.D. 6681, 28 FR 11122, Oct. 17, 1963]
Title 26: Internal Revenue
PART 1—INCOME TAXES
Mutual Insurance Companies (Other Than Life and Certain Marine Insurance Companies and Other Than Fire or Flood Insurance Companies Which Operate on Basis of Perpetual Policies or Premium Deposits)
§ 1.825-1 Unused loss deduction; in general.
