Cost Basis

The cost basis, is the original value of an investment that has previously been taxed. Taxable gain is determined as the positive difference between the Policy's cash value and the cost basis. In the US there are two types of cost bases defined by the TEFRA regulations that went into effect, Aug 14, 1982. This regulation categorizes cost basis as Pre-TEFRA cost basis and Post-TEFRA cost basis referring to investments prior to the TEFRA effective date and investments on and after the TEFRA effective date. With this regulation, the taxable gain is the difference between the Policy's cash value and the sum of preTEFRA- and post-TEFRA cost bases. During reductions/withdrawals of the cash value in a Policy, the Pre-TEFRA cost basis is reduced first and upon its elimination removal continues next with taxable gain until its elimination where the removal continues next with Post-TEFRA cost basis until its elimination.

The cost basis values carried from one valuation to another are persisted in records on the Deposit or Fund tables. Differences between an activity's start and end values are persisted on Deposit or Fund change tables where data for those tables normally store those changes to a fund's value. For backward compatibility, null values are considered as 0.

  • Valuation: The Valuation data will contain cost basis information. This information will be equal to the ending values of the immediately preceding Activity's ending cost basis information. Valuation data is made available to an Activity's Math, Post Assignment Validate Expressions, Screen Math, Inquiry Screen, Values Screen, and Scheduled Valuation through the existing configuration where valuation is performed.

  • Assignment: Assignment configuration includes a new attribute to provide values for adding and removing value from the cost basis data, in the assignment's <MoneyType> element. The new attributes will reference "collection" variable types whose contents will provide the amount of change to apply to each fund or deposit.

  • ApplyByFund: Adds money to a fund so all manipulation of cost basis values should be positive values. Refer to the updates in the ApplyByFund Elements And Attributes.

  • RemoveByFund: Removes money from one or more funds or deposits so all manipulations of cost basis values should be negative values. Refer to the updates in the RemoveByFund Elements And Attributes.

  • ValuesScreen: The <PolicyValues> section of the ValuesScreen pulls its data from the Math in the PolicyValues business rule using a <Fields> configuration. In the <Name> element of the Funds grid the PrimaryCostBasis and the TaxableGain is added. Refer to the updates in the ValuesScree Elements And Attributes.