View Full Version : Tax Reserves on Life Insurance in US
09-19-2001, 05:04 PM
Can anybody point me to where in the reading that tax reserves are computed? I thought it would be in the tax study note. It wasn't.
09-19-2001, 05:09 PM
If you are talking about SoA5, then I know that LIP&F chapter six talks about reserves. However to me the description of the reserve (solvency, tax, earnings) calculation is not very straight forward.
09-19-2001, 09:11 PM
Calculation Method required by IRS since 1984
Tax Refom Act
1. Calculate a 'test reserve ' called Federaly Prescribed Reserve (FPR) using Solvency reserve formula but with higher interest rate and ultimate mortality.
2. Calculate MIN(FPR, Solvency)
3. Tax Reserve=MAX[(2. above),Cash Value]
step 3 means Tax Reserve >= Cash Value.
Tax reserves usually less than Solvency.
Reserves are a liability .
A liability is a reduction to taxable income.
1984 method gives you less of a reduction and thus a higher taxable income.
vBulletin® v3.7.6, Copyright ©2000-2013, Jelsoft Enterprises Ltd.