Rev. Rul. 87-20

1987-1 C.B. 168, 1987-10 I.R.B. 14.

MUTUAL LIFE INSURANCE COMPANIES, DIFFERENTIAL EARNINGS RATE

Published: March 9, 1987

Section 809.-Reduction in Certain Deductions of Mutual Life Insurance Companies

  Mutual life insurance companies, differential earnings rate. The average mutual earnings rate for 1984 published in Rev. Ruls. 84-114 and 86-157 is corrected. Mutual life insurance companies use the differential earnings rate for 1985, the recomputed differential earnings rate for 1984, and the other figures on which these rates are based set forth in Rev. Rul. 86-157 to compute their income tax liability for 1985. Rev. Rul. 86-157 modified.

  This Revenue Ruling corrects the average mutual earnings rate for 1984 set forth in Rev. Rul. 86-157, 1986-52 I.R.B. 13, which modified and superseded Rev. Rul. 1986-114, 1986-39 I.R.B. 14. Under section 809 of the Internal Revenue Code, as amended by the Tax Reform Act of 1986, 1986-3 (Vol. 1) C.B., mutual life insurance companies use the rates contained in these rulings in computing their income tax liability for 1985.

  The average mutual earnings rate for 1984 was one of the figures used in computing the recomputed differential earnings rate for 1984. These two rates were among those contained in Rev. Rul. 86-114. Due to a computational error, both of these rates as set forth in Rev. Rul. 86-114 were incorrect. Rev. Rul. 86-157 corrected the recomputed differential earnings rate for 1984. The average mutual earnings rate should have been, but was not, similarly corrected in Rev. Rul. 86-157. Thus, the rates published in Rev. Rul. 86-157 were mutually inconsistent. Since the recomputed differential earnings rate for 1984 set forth in Rev. Rul. 86-157 is correct, the present correction of the average mutual earnings rate for 1984 does not affect the computation of income tax liability of mutual life insurance companies for 1985. The corrected figure will be used by the Service in computing the differential earnings rate for 1986.

  Rev. Rul. 86-157 as published in the Internal Revenue Bulletin incorrectly states that the average mutual earnings rate for 1984 is 5.930. The corrected average mutual earnings rate for 1984 is 5.746 percent.

  When Rev. Rul. 86-157 is republished in the Cumulative Bulletin, it will contain the correct figure of 5.746 percent as the average mutual earnings rate for 1984.

EFFECT ON OTHER DOCUMENTS

  Rev. Rul. 86-157 is modified with respect to the average mutual earnings rate for 1984.

Rev. Rul. 87-20, 1987-1 C.B. 168, 1987-10 I.R.B. 14