Companies selling life insurance are taxed on both the income from investments and profits from underwriting. The underwriting profit is taxed:

Question

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The underwriting profit is taxed 50% during the year earned; 50% when paid out to stockholders. Shareholder surplus comes from the 50% of underwriting income that is taxed. The other 50% that is not taxed becomes the policyholders' surplus.

Companies Selling Life Insurance Are Taxed on Both the Income