country or to any possession of the United States, and the amount of any such taxes accrued but not paid during the taxable year; (e) The names and addresses of the individuals who would be entitled to share in the net income of the partnership if distributed; (f) The amount of the distributive share of such net income of each such individual; (g) The part of such share of the net income which consists of earned income (see sections 25 (a) (4) and (5) and 185); and (h) Such other facts as are required by the return form. SEC. 188. DIFFERENT TAXABLE YEARS OF PARTNER AND PARTNERSHIP. (a) General rule.—If the taxable year of a partner is different from that of the partnership, the distributive share of the net income of the partnership to be included in computing the net income of the partner for his taxable year shall be based upon the net income of the partnership for any taxable year of the partnership (whether beginning on, before, or after January 1, 1934) ending within the taxable year of the partner. (b) Partnership years beginning in 1933.—For the purpose of computing the net income of a partner for a taxable year beginning after December 31, 1933, the partnership net income for any taxable year of the partnership beginning before January 1, 1934, shall be computed under the Revenue Act of 1932, without regard to sections 101 and 186 thereof (relating to capital net gain and capital net loss) but as if section 117 of this Act (except subsection (d) thereof) had formed a part of Title I of the Revenue Act of 1932. ART. 188-1. Different taxable years of partner and partnership.-Section 188 (b) applies to cases where a partnership has a taxable year beginning in 1933 and ending within any member's taxable year beginning after December 31, 1933. If in such a case the partnership sells or exchanges capital assets as defined in section 117 (b) of the Revenue Act of 1934, the gain or loss recognized upon such sale or exchange to be taken into account in computing partnership net income for the purpose of computing the net income of any member for his taxable year beginning after December 31, 1933, within which ended the taxable year of the partnership, shall be in accordance with section 117 of the Revenue Act of 1934 (except subsection (d) thereof) and without regard to sections 101 and 186 of the Revenue Act of 1932, but in all other respects the partnership net income shall be computed under the Revenue Act of 1932, as amended by section 218 of the National Industrial Recovery Act. Pursuant to the provisions of section 23 (r) and (s) of the Revenue Act of 1932, as amended by section 218 (b) and (c) of the National Industrial Recovery Act, losses so taken into account from sales or exchanges of stocks and bonds (as defined in section 23 (t) of the Revenue Act of 1932 and which are not capital assets as defined in section 101 of that Act) shall be allowed as deductions only to the extent of the gains, also so taken into account, from such sales or exchanges (including any gain derived from the retirement of the partnership's own obligations). This paragraph may be illustrated by the following example: Example: The M Company is a partnership composed of two members, A and B. The taxable year of the M Company is the fiscal year ending June 30. The taxable year of both A and B is the calendar year. The M Company is not a person which is excepted, under section 23 (r) (3) of the Revenue Act of 1932, as amended by section 218 (c) of the National Industrial Recovery Act, from the limitation on losses provided in section 23 (r) (1) and (s) of the Revenue Act of 1932. For the fiscal year of the M Company ended June 30, 1934, its entire net income was derived from sales of capital assets (as defined in section 117 (b) of the Revenue Act of 1934) as follows: Under section 117 (a) of the Revenue Act of 1934, the amount of the gain recognized upon the sale of the stock held for one year to be taken into account in computing net income is $5,000 and the amount of the loss recognized upon the sale of the stock held for two years to be so taken into account is $12,000. Since neither the stock held for one year nor the stock held for two years is a capital asset as defined in section 101 of the Revenue Act of 1932, the amount allowable as a deduction for the loss taken into account under section 117 (a) of the Revenue Act of 1934 upon the sale of the stock held for two years is limited pursuant to section 23 (r) of the Revenue Act of 1932, as amended by section 218 of the National Industrial Recovery Act, to the gain taken into account under section 117 (a) of the Revenue Act of 1934 upon the sale of the stock held for one year, or $5,000. The net income of the M Company for its fiscal year ended June 30, 1934, for the purpose of computing the net income of A and the net income of B for their taxable year (the calendar year 1934) is $16,000 ($5,000 plus $16,000 minus $5,000). Title I of the Act, as provided in section 1, applies to taxable years beginning after December 31, 1933, and the income tax rates provided by the Act apply to the net income of a partner for his taxable year beginning after December 31, 1933, including his entire distributive share of the net income of a partnership includible under section 188 (a) in computing his net income, irrespective of whether the taxable year of the partnership began before January 1, 1934. As to the meaning of “taxable year," see section 48 (a). CHAPTER XXV INSURANCE COMPANIES Supplement G-Insurance Companies SEC. 201. TAX ON LIFE INSURANCE COMPANIES. (a) Definition.-When used in this title the term "life insurance company means an insurance company engaged in the business of issuing life insurance and annuity contracts (including contracts of combined life, health, and accident insurance), the reserve funds of which held for the fulfillment of such contracts comprise more than 50 per centum of its total reserve funds. ART. 201(a)-1. Life insurance companies: Definition.-The term "life insurance company as used in Title I is defined in section 201 (a). In determining whether an insurance company is a "life insurance company" as defined in section 201 (a), no reserve shall be 201(a), regarded as held for the fulfillment of an insurance contract unless it conforms to the definition of "reserve" contained in article 203 (a) (2)−1. [SEC. 201. TAX ON LIFE INSURANCE COMPANIES.] (b) Rate of tax.-In lieu of the tax imposed by section 13, there shall be levied, collected, and paid for each taxable year upon the net income of every life insurance company a tax as follows: (1) In the case of a domestic life insurance company, 13 per centum of the amount of its net income in excess of the credit provided in subsection (c) of this section; (2) In the case of a foreign life insurance company, 134 per centum of the amount of its net income from sources within the United States in excess of the credit provided in subsection (c) of this section. ART. 201 (b)-1. Life insurance companies: Rate of tax.-Life insurance companies are subject to the tax imposed by section 201 (b), in lieu of the tax imposed by section 13. The rate for 1934 and for subsequent years is 133⁄44 per cent, and the net income upon which the tax is imposed differs from the net income of other corporations. Life insurance companies are not subject to the provisions of section 117 (capital gains and losses). All provisions of the Act and of these regulations not inconsistent with the specific provisions of sections 201-203 are applicable to the assessment and collection of the tax imposed by section 201 (b), and life insurance companies are subject to the same penalties as are provided in the case of returns and payment of income tax by other corporations. The return shall be on Form 1120 L. [SEC. 201. TAX ON LIFE INSURANCE COMPANIES.] (c) For the purpose only of the tax imposed by this section there shall be allowed as a credit against net income (or, in the case of a foreign life insurance company, against net income from sources within the United States) the amount received as interest upon obligations of the United States or of corporations organized under Act of Congress which is allowed to an individual as a credit for purposes of normal tax by section 25 (a) (2) or (3). In the case of a foreign life insurance company the credit shall not exceed an amount which bears the same ratio to the amount otherwise allowed as a credit as the reserve funds required by law and held by it at the end of the taxable year upon business transacted within the United States is of the reserve funds held by it at the end of the taxable year upon all business transacted. ART. 201 (c)-1. Credits.-A life insurance company is entitled to a credit against net income (or in case of a foreign life insurance company, against net income from sources within the United States), for the purpose only of the tax imposed by section 201, of the same amount received as interest (not entirely exempt from tax) upon obligations of the United States or of corporations organized under Act of Congress as is allowable to an individual as a credit for purposes of normal tax under section 25 (a) (2) or (3). (See also section 26.) In the case of a foreign life insurance company, such credit is limited to the same proportion of the entire credit otherwise allowable as the reserve funds required by law and held at the end of the taxable year upon business transacted within the United States is of the reserve funds held by it at the end of the taxable year upon all business transacted. For definition of reserve funds see article 203 (a) (2)-1. As to foreign companies, see also section 203 (c). SEC. 202. GROSS INCOME OF LIFE INSURANCE COMPANIES. (a) In the case of a life insurance company the term " gross income means the gross amount of income received during the taxable year from interest, dividends, and rents. (b) The term "reserve funds required by law" includes, in the case of assessment insurance, sums actually deposited by any company or association with State or Territorial officers pursuant to law as guaranty or reserve funds, and any funds maintained under the charter or articles of incorporation of the company or association exclusively for the payment of claims arising under certificates of membership or policies issued upon the assessment plan and not subject to any other use. SEC. 203. NET INCOME OF LIFE INSURANCE COMPANIES. 66 (a) General rule.-In the case of a life insurance company the term ART. 203(a)-1. General limitation on deductions. In addition to the limitations on deductions hereinafter specifically referred to, life insurance companies are subject to a general limitation on deductions. See section 24 (a) (5). |