Which taxes are not reported as part of investment income, but are instead reported as a component of surplus through unrealized gains and losses?

Deferred taxes result from temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax bases. Unrealized gains and losses on certain investments are recognized in surplus for statutory accounting purposes but are not taxable until realized. The corresponding tax effect of these unrealized items is recorded as a deferred tax liability or asset. This deferred tax amount is reported as a direct adjustment to surplus, netting against the unrealized gain or loss, rather than being reported as part of the income tax expense on the income statement.

A. Depreciated: Depreciation is an accounting method for allocating the cost of a tangible asset over its life; it is not a type of tax.

C. Limited: "Limited tax" is not a standard accounting term for the tax treatment of unrealized gains and is not relevant in this context.

D. Venture: Venture refers to a type of investment (e.g., venture capital), not a classification of tax.

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1. National Association of Insurance Commissioners (NAIC). Statement of Statutory Accounting Principles (SSAP) No. 101—Income Taxes. In this standard, paragraph 11.d specifies that "The change in deferred income taxes attributable to unrealized capital gains and losses...shall be recorded as a direct adjustment to surplus as a component of the change in net unrealized capital gains and losses." This directly supports that the tax effect of unrealized gains/losses is a component of surplus.

2. Spiceland, J. D., Nelson, M. W., & Thomas, W. B. (2021). Intermediate Accounting (11th ed.). McGraw-Hill Education. In Chapter 16, the section on "Intraperiod Tax Allocation" explains that the income tax effect of items recognized in other comprehensive income (which is analogous to direct adjustments to surplus for unrealized gains) must also be allocated to that component of equity, separate from income from continuing operations.

3. Financial Accounting Standards Board (FASB). Accounting Standards Codification (ASC) Topic 740, Income Taxes. ASC 740-20-45-11 requires that the tax effect of gains and losses included in other comprehensive income (such as unrealized gains on available-for-sale securities) shall be charged or credited directly to other comprehensive income. This principle aligns with the statutory accounting treatment of reporting the tax effect in surplus.