Example. The books of T, an insurance company, selling only life insurance and cancellable accident and health insurance, reflect (after adjustment under section 806 (a)) the following facts for the taxable year 1958:
Jan. 1 | Dec. 31 | Mean of year | |
1. Life insurance reserves | $1,000 | $2,000 | $1,500 |
2. Policy loans | 50 | 850 | 450 |
3. Life insurance reserves less policy loans | 1,050 | ||
4. Unearned premiums, and unpaid losses (whether or not ascertained), on cancellable accident and health insurance | 900 | 1,600 | 1,250 |
5. Total reserves adjusted for policy loans (item 3 plus item 4) | 2,300 |
As the rules provided by section 801 (a) and (d) require that the figure in item 3 ($1,050) be more than 50 percent of the mean of the year figure in item 5 ($2,300) for an insurance company to qualify as a life insurance company, T would not qualify as a life insurance company for the taxable year 1958.
26 C.F.R. §1.801-6