INCOME TAX 73 surance company), the special class net income shall be the net income from sources within the United States minus the sum of- (A) INTEREST ON OBLIGATIONS OF THE UNITED STATES AND ITS INSTRUMENTALTmES. -T he credit provided in section 26 (a). (B) DIVIDENDs RECErIED. -The credit provided in section 26 (b). (3) No UNITED STATES INSURANCE BUSINESS.-Foreign insurance companies not carrying on an insurance business within the United States shall not be taxable under this section but shall be taxable as other foreign corporations. (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) INVESTMrENT 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 EARNrD. --"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 INCUoRED. --"Losses incurred" means losses incurred during the taxable year on insurance contracts, computed as fol- lows: To losses paid during the taxable year, add salvage and reinsur- ance 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 ex- penses 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 08907°-3b - -PT . -- 6
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