For example, if a life insurance company makes an installment sale of a capital asset prior to January 1, 1959, and payments are received after such date, any capital gain attributable to such sale shall not be taken into account for purposes of section 802(a). Furthermore, any gain referred to in subparagraphs (1) and (2) and the preceding sentence shall not be taken into account in determining the excess of the net short-term capital gain over the net long-term capital loss (and for taxable years beginning after December 31, 1961, the excess of the net long-term capital gain over the net short-term capital loss) for purposes of computing taxable investment income under section 804(a)(2) or gain or loss from operations under section 809(b).
Company R (reinsured) | |
Net decrease in reserves (sec. 809(c) (2)) | $3,000,000 |
Capital gain (as limited by sec. 817(b) (1)) to be taxed separately under sec. 802(a)(2) | 20,000 |
Consideration paid by R to S in respect of S's assuming liabilities under contracts issued by R (sec. 809(d)(7)) | $3,000,000 |
INCOME | |
Company S (reinsurer) | |
Consideration received by S in respect of assuming liabilities under contracts issued by R (sec. 809(c)(1)) | $3,000,000 |
DEDUCTIONS | |
Net increase in reserves (sec.809(d)(2)) | $3,000,000 |
26 C.F.R. §1.817-4