Tax-Basis Income (version 2) - updated for 2021.Spring
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Calculate the income tax for year CY . (Modeled on 2017.Fall #21)
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CY |
CY-1 |
| written premium |
WP |
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| unearned premium |
UEP |
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| paid loss |
PL |
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| loss reserves (undiscounted) |
LU |
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| loss reserves (discounted) |
LD |
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| interest on tax-exempt municipal bonds |
B |
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Notation
TBI:
Tax-Basis Income (same as RTI)
RTI:
Regular Taxable Income (same as TBI)
InvInc:
taxable portion of investment income
Formulas
final tax liability
= RIT
RIT
= RTI x 21% = TBI x 21% (RTI & TBI or Tax-Basis Income are the same things.)
TBI (RTI)
= TBEP + InvInc – TBIL
TBEP
= EP + 20% x chg(UEP)
= WP - 80% x chg(UEP)
InvInc (different options depending on information given)
→ if EP is given, assume it's invested and apply compound interest (it's fully taxable)
→ if tax-exempt municipal bonds are given, add 25% of interest income (it isn't fully tax-exempt)
| TBI (RTI) |
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| TBEP |
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| InvInc (taxable) |
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| TBIL |
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