Application of borrowings. For pur- poses of subdivision (i) of this subpara- graph, if during a 7-year period referred to in such subdivision the taxpayer, di- rectly or indirectly, borrows with re- spect to more than one annual pre- mium on a contract, such borrowing shall be considered first attributable to the premium for the current policy year (within the meaning of subdivi- sion (iii) of this subparagraph) and then attributable to premiums for prior policy years beginning with the most recent prior policy year (but not including any prior policy year to the extent that such taxpayer has indebt- edness outstanding with respect to the premium for such prior policy year). If such borrowing exceeds the premiums paid for the current policy year and for prior policy years and the taxpayer has, with respect to the current policy year, deposited premiums in advance of the due date of such premiums, such excess borrowing shall be considered indebtedness incurred to carry the con- tract which is attributable to the pre- miums deposited for succeeding policy years beginning with the premium for the next succeeding policy year. The preceding sentence shall not apply to a single premium contract referred to in § 1.264–2.
