A bill to amend the Tax Reform Act of 1984 to provide a special rule for mutual life insurance companies and to amend the Internal Revenue Code of 1986 to provide depositors in insolvent financial institutions the option of a one-time ordinary loss deduction.

Amends the Tax Reform Act of 1984 with respect to the tax treatment of life insurance subsidiaries of mutual property and casualty insurance companies. Revises the effect on such subsidiaries of an election by the parent company to treat individual noncancellable accident and health contracts as cancellable. Repeals the mandatory treatment of a stock life insurance company, in such a situation, as though it were a mutual life insurance company. Limits the amount of taxable income an electing parent may take into account when determining the small life insurance company deduction of any controlled group which includes a mutual company which made such an election. Requires that the amount of taxable income of the electing parent taken into account be adjusted, under regulations, so that the revenue losses to the Treasury generated by the election shall not exceed $300,000 during any fiscal year beginning after September 30, 1986.

Amends the Internal Revenue Code to allow depositors in bankrupt or insolvent financial institutions to elect to treat their deposits as ordinary loss, provided such deposits: (1) are not federally insured; and (2) do not exceed $20,000 ($10,000 for a separate return by a married person) per taxpayer per institution. Reduces such limit by any amount insured under State law. Provides for revocation of the election to treat as ordinary loss only with the consent of the Secretary of the Treasury.