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Treasury Regulations · 26 CFR

§ 1.815-3. Shareholders surplus account.

In effect eCFR current as of October 15, 2026

Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).

Regulation under 26 U.S.C. § 815

Cite as 26 CFR § 1.815-3

At a glance

Read from the text and its source citation. Not part of the regulation.

Status
In the current eCFR
Issued
January 20, 1961 by T.D. 6535
Last amended
June 29, 1972 by T.D. 7189
Issued under
26 U.S.C. § 815
Length
886 words · about 4 min to read
Cross-references
cites 6 Code sections and 1 regulation; cited by 4
(a) In general. Every stock life insurance company subject to the tax imposed by section 802 shall establish and maintain a shareholders surplus account. This account shall be established as of January 1, 1958, and the beginning or opening balance of the shareholders surplus account on that date shall be zero.
(b) Additions to shareholders surplus account.
(1) The amount added to the shareholders surplus account for any taxable year beginning after December 31, 1957, shall be the amount by which the sum of:
(i) The life insurance company taxable income (computed without regard to section 802(b)(3)),
(ii) In the case of a taxable year beginning after December 31, 1958, the amount (if any) by which the net long-term capital gain exceeds the net short-term capital loss, reduced (in the case of a taxable year beginning after December 31, 1961) by the amount referred to in subdivision (i) of this subparagraph,
(iii) The deduction for partially tax-exempt interest provided by section 242 (as modified by section 804(a)(3)), the deductions for dividends received provided by sections 243, 244, and 245 (as modified by section 809(d)(8)(B)), and the amount of interest excluded from gross income under section 103, and
(iv) The small business deduction provided by section 809(d)(10). Exceeds the taxes imposed for the taxable year by section 802(a), computed without regard to section 802(b)(3).
(c) Subtractions from shareholders surplus account—
(1) In general. There shall be subtracted from the cumulative balance in the shareholders surplus account at the end of any taxable year, computed without diminution by reason of distributions made during the taxable year, the amount which is treated as being distributed out of such account under section 815(a) and paragraph (b) of § 1.815-2.
(2) Special rule; distributions in 1958. There shall be subtracted from the shareholders surplus account (to the extent thereof) for any taxable year beginning in 1958 the amount of the distributions to shareholders made by the company during 1958. For example, assume S, a stock life insurance company, had additions to its shareholders surplus account (as determined under section 815(b)(2) and paragraph (b) of this section) for the taxable year 1958 of $10,000, and actually distributed as dividends to its shareholders $8,000 during the year 1958. The balance in S's shareholders surplus account as of January 1, 1959, shall be $2,000. If S had distributed $12,000 as dividends in 1958, the balance in its shareholders surplus account as of January 1, 1959, would be zero and the other accounts referred to in section 815(a)(3) and paragraph (b)(1)(iii) of § 1.815-2 would be reduced by $2,000.
(d) Illustration of principles. The application of section 815(b) and this section may be illustrated by the following example:
Example.

The books of S, a stock life insurance company, reflect the following items for the taxable year 1960.

Balance in shareholders surplus account as of 1-1-60$5,000
Life insurance company taxable income computed without regard to sec. 802(b)(3)4,000
Excess of net long-term capital gain over net short-term capital loss1,700
Tax-exempt interest included in gross investment income under sec. 804(b)100
Small business deduction (determined under sec. 809(d)(10))200
Tax liability under sec. 802(a) (1) and (2) computed without regard to sec. 802(b)(3)1,625
Amount distributed to shareholders9,000

For purposes of determining the amount to be subtracted from its shareholders surplus account for the taxable year, S would first make up the following schedule in order to determine the cumulative balance in the shareholders surplus account at the end of the taxable year, computed without diminution by reason of distributions made during the taxable year:

(1) Balance in shareholders surplus account as of 1-1-60$5,000
(2) Additions to account:
(a) Life insurance company taxable income computed without regard to sec. 802(b)(3)$4,000
(b) Excess of net long-term capital gain over net short-term capital loss1,700
(c) Tax-exempt interest included in gross investment income under sec. 804(b)100
(d) Small business deduction (determined under sec. 809(d)(10))200
Total6,000
Less:
Tax liability under sec. 802(a) (1) and (2) computed without regard to sec. 802(b)(3)1,625
-————4,375
(3) Cumulative balance in shareholders surplus account as of 12-31-60 (item (1) plus item (2))9,375

Since the amount distributed to shareholders during the taxable year, $9,000, does not exceed the cumulative balance in the shareholders surplus account at the end of the taxable year, computed without diminution by reason of distributions made during the taxable year, $9,375, under the provisions of section 815(a), the entire distribution shall be treated as being made out of the shareholders surplus account. Thus, $9,000 shall be subtracted from the shareholders surplus account (leaving a balance of $375 in such account at the end of the taxable year) and S shall incur no additional tax liability by reason of the distribution to its shareholders during the taxable year 1960.

[T.D. 6535, 26 FR 542, Jan. 20, 1961, as amended by T.D. 7189, 37 FR 12793, June 29, 1972]

Other regulations under § 815

Cross-references

Computed from the citations in the text of 26 CFR.

Code sections it cites

Regulations it cites

Cited by 4 other regulations

Amendment history

From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.

  1. Amended by T.D. 7189 (37 FR 12793)
  2. Issued by T.D. 6535 (26 FR 542)

Where it sits in 26 CFR

  1. Subchapter A Income tax
  2. Part 1 Income taxes
  3. Distributions to shareholders

Nearby sections