For purposes of this paragraph, the same item shall be counted only once and deficiency reserves (as defined in section 801(b)(4) and paragraph (e)(4) of § 1.801-4 ) shall not be taken into account.
Sum of items described in section 810(c) (1) through (6) at beginning of taxable year | $940 |
Sum of items described in section 810(c) (1) through (6) at end of taxable year | 1,060 |
Required interest (as defined in section 809(a)(2)) | 70 |
Investment yield (as defined in section 804(c)) | 100 |
Amount of investment yield not included in gain or loss from operations for the taxable year by reason of section 809(a)(1) | 70 |
In order to determine the adjustment for decrease or increase in the sum of the items described in section 810(c) for the taxable year, R must first reduce the sum of such items at the end of the taxable year ($1,060) by the amount of investment yield ($70) not included in gain or loss from operations for the taxable year by reason of section 809(a)(1). Since the adjusted sum of such items at the end of the taxable year, $990 ($1,060 minus $70), exceeds the sum of such items at the beginning of the taxable year, $940, the excess of $50 ($990 minus $940) shall be taken into account as a net increase under section 809(d)(2) and paragraph (a)(2) of § 1.809-5 in determining gain or loss from operations.
Sum of items described in section 810(c) (1) through (6) at beginning of taxable year | $1,970 |
Sum of items described in section 810(c) (1) through (6) at the end of taxable year | 2,040 |
Required interest (as defined in section 809(a)(2)) | 60 |
Investment yield (as defined in section 804(c)) | 40 |
Amount of investment yield not included in gain or loss from operations by reason of section 809(a)(1) | 40 |
Under the provisions of section 809(a)(1), since the required interest ($60) exceeds the investment yield ($40), the share of each and every item of investment yield set aside for policyholders and not included in gain or loss from operations for the taxable year shall be 100 percent. Thus, applying the provisions of section 810 (a) and (b), the sum of the items described in section 810(c) at the end of the taxable year ($2,040) must first be reduced by the entire amount of the investment yield ($40) in order to determine the net increase or decrease in the sum of such items for the taxable year. Since the adjusted sum of such items at the end of the taxable year, $2,000 ($2,040 minus $40), is greater than the sum of such items at the beginning of the taxable year, $1,970, the excess of $30 ($2,000 minus $1,970) shall be taken into account as a net increase under section 809(d)(2) and paragraph (a)(2) of § 1.809-5 in determining gain or loss from operations. No additional deduction is allowed under section 809(d) for the amount ($20) by which the required interest exceeds the investment yield for the taxable year.
26 C.F.R. §1.810-2