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

Question

Options

• ADepreciated
• BDeferred
• CLimited
• DVenture

• A
  8% (3)
• B
  84% (31)
• C
  5% (2)
• D
  3% (1)

Explanation

Deferred taxes (B) are the answer because they arise from temporary timing differences between when income is recognized for book purposes versus tax purposes. Unrealized gains and losses on investments haven't been realized for tax purposes yet, so the associated tax effect is deferred - recorded directly in surplus (Other Comprehensive Income/OCI) rather than flowing through investment income on the income statement.

Why the distractors are wrong:

• Depreciated (A) is not a tax category at all - depreciation is an accounting method for allocating asset costs over time.
• Limited (C) is not a recognized tax classification in this context; it describes constraints (e.g., limited partnerships) rather than a tax reporting mechanism.
• Venture (D) refers to a type of business entity (venture capital), not a tax category with special reporting treatment.

Memory tip: Think "Deferred = Delayed" - deferred taxes are the tax consequence of something that hasn't happened for tax purposes yet (unrealized), so they're parked in surplus, waiting, rather than reported as current income.

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