timed out BattleActs100

Tax-Basis Income (easier version)

myID_+ priorDate_+ record_+ WET_+ fadeFactor_

Calculate the tax-basis income for years CY & CY+1. (Modeled on 2018.Spring #14)

  current score:
0.000

tax-basis income for year CY
tax-basis income for year CY+1
Assume: 1 policy (not renewed), no UEP, 1 loss paid in full on payment date

policy effective date Jan 1, CY
loss date Dec 31, CY ← reported/recorded same day
payment date Dec 31, CY+1 ← paid in full


policy premium 7,000    = EP (SAP basis)
estimate of loss    = L (undiscounted)
investment rate    = i
IRS discount rate    = d

Notation

TBI
= Tax-Basis Income
TBEP
= Tax-Basis Earned Premium
InvInc
= Investment Income (taxable portion only, but all of it is taxable in this easier version)
PL
= Paid Loss
IL
= Incurred Loss
LD
= Losses after Discounting

Formulas

TBI
=    TBEP    +    InvInc    – TBIL

TBEP
=    EP    +    20% x chg(UEP)

InvInc
→ just apply compound interest to EP (all of it is taxable in this version of the problem)

TBIL
=    PL    +    chg(LD)

Solution:
TBICY
TBICY+1
TBEPCY
InvIncCY
TBILCY
TBEPCY+1
InvIncCY+1
TBILCY+1