Investment Income
I am having trouble determining why "Net Realized Captial Gain less Capital Gains Tax" is included in Net Income for Fall 2017 #10, but in Fall 2018 #16 the Examiner's Report mentions they specifically took away points if "Net realized capital gains before capital gains tax" was included (even though they still subtract off for the "Capital gains tax").
Should net realized capital gains be included or excluded? If it is to be excluded, then why are we still removing the capital gains tax? Why are these 2 problems different?
Comments
I may have the answer to my question after looking at the NAIC.IRIS forum. I just would like clarification to make sure my thought process is correct:
-We are always taking realized capital gains into account, but if we were to include it in the Fall 2018 #16 calculation then we would actually be double-counting it?
-Are the taxes paid on (Investment gain on funds attributable to insurance transactions) & (Investment gain attributable to capital & surplus) be thought to be taken care of by removing (Federal and foreign income taxes incurred) & (capital gains tax on net realized capital gains)?
It feels like a lot of things are mixed together & knowing what still needs to be added in or removed out of these lumped totals seems non-intuitive to me.
net investment income (after non-federal tax) + net realized capital gains (before capital gains tax) = investment gain on funds attributable to insurance transactions + investment gain attributable to capital and surplus
The terms in the right-side of the equation come from IEE.
Then, the only tax left to back out before you include in total income is the capital gains tax on net realized capital gains.
Total income is subject to federal income tax.