Page:United States Statutes at Large Volume 52.djvu/566

 52 STAT.] 75TH CONG. , 3D SESS.-CH. 289-MAY 28, 1938 (b) DEFINITION OF INCOME, ETC. -In the case of an insurance com- pany subject to the tax imposed by this section- (1) GROSS INCOME. -"Gross income" means the sum of (A) the combined gross amount earned during the taxable year, from investment income and from underwriting income as provided in this subsection, computed on the basis of the underwriting and investment exhibit of the annual statement approved by the National Convention of Insurance Commissioners, and (B) gain during the taxable year from the sale or other disposition of property, and (C) all other items constituting gross income under section 22; (2) NET INCOME.- "Net income" means the gross income as defined in paragraph (1) of this subsection less the deductions allowed by subsection (c) of this section; (3) INVESTMENT INCOME.- "Investment income" means the gross amount of income earned during the taxable year from interest, dividends, and rents, computed as follows: To all interest, dividends and rents received during the taxable year, add interest, dividends and rents due and accrued at the end of the taxable year, and deduct all interest, dividends and rents due and accrued at the end of the preceding taxable year; (4) UNDERwRITING INCOME.- "Underwriting income" means the premiums earned on insurance contracts during the taxable year less losses incurred and expenses incurred; (5) PREMIUMS EARNED.- "Premiums earned on insurance con- tracts during the taxable year" means an amount computed as follows: From the amount of gross premiums written on insurance con- tracts during the taxable year, deduct return premiums and premiums paid for reinsurance. To the result so obtained add unearned premiums on outstanding business at the end of the preceding taxable year and deduct unearned premiums on out- standing business at the end of the taxable year; (6) LossES INCUIRED. -"Losses incurred" means losses incurred during the taxable year on insurance contracts, computed as follows: To losses paid during the taxable year, add salvage and rein- surance recoverable outstanding at the end of the preceding taxable year, and deduct salvage and reinsurance recoverable outstanding at the end of the taxable year. To the result so obtained add all unpaid losses outstanding at the end of the taxable year and deduct unpaid losses outstanding at the end of the preceding taxable year; (7) EXPENSES INCURRED.-"Expenses incurred" means all expenses shown on the annual statement approved by the National Convention of Insurance Commissioners, and shall be computed as follows: To all expenses paid during the taxable year add expenses unpaid at the end of the taxable year and deduct expenses unpaid at the end of the preceding taxable year. For the purpose of computing the net income subject to the tax imposed by this section there shall be deducted from expenses incurred as defined in this paragraph all expenses incurred which are not allowed as deductions by subsection (c) of this section. (c) DEDucTIoNs ALLOWrED. -In computing the net income of an insurance company subject to the tax imposed by this section there shall be allowed as deductions: (1) All ordinary and necessary expenses incurred, as provided in section 23 (a); Definitions. "Gross income." Ante, p. 457. "Net income. " "Investment in- come." "Underwriting in- come." "Premiums earned on insurance contracts during the taxable year. " "Losses incurred." "Expenses in- curred." Deductions allowed Business expenses. Ante, p. 460. 525

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