Texas Register, Volume 9, Number 3, Pages 223-296, January 10, 1984 Page: 281
223-296 p. ; 28 cm.View a full description of this periodical.
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(b) The formula specified in subsection (a) of this
rule is applicable to all sales of real estate; provided,
however, companies have the option of adopting the cur-
rent formula to prior transactions which have been sub-
ject to the procedure outlined in Exhibit A which follows
the text of this subsection. Should companies choose to
apply the current formula to a prior transaction, the State
Board of Insurance shall allow similar treatment in the
examination report In the latter instance, the State Board
of Insurance still has the burden of verifying the factual
presentations utilized in the company's decision. The ap-
plication of this formula shall be made only after
thorough analysis of all written or verbal agreements
relative thereto including, but not limited to, leaseback
agreements, repurchase or buy-back agreements, contin-
Unpaid Balance of Note
Sale Price x Net Progent deferred expenses, or other side agreements which
have inherent qualities or characteristics which have a
material effect on whether the selling transaction is bona
fide. Notwithstanding any provision of this rule, no pro-
vision thereof shall apply to a sale of realty when the con-
sideration therefor is totally paid in cash and in mortgage
loan(s) on the former property of the insurer that meet
the standards for mortgage loans as specified in either
the Insurance Code, Part II, Articles 2.08 and 2.10 or
Article 3 39, depending on the type of insurer involved.
Exhibit A: The formula for calculation of the liability
for unrealized profit on the sale of real estate where a
part of the profit is capitalized and will not be recovered
until a future date is as follows:fit = Liability for Unrealized Profit
The following schedule reflects two examples of the prac-
tical application based on a token down payment and the
sale without a down payment:
Assumption of Sale of Real Estate with Book Value of $45,000Selling price
Book value
Gross Profit
Less selling expenses:
Commission on sale
Legal fees and miscellaneous expenses
Net Profit$5,000
2 500$100,000
45 000
55,000Cash down payment
Original loan retained
Selling price
Loan made on December 31, 1964, to be retired at $10,000
per year plus interest with first principal payment due De-
cember 31. 1965.Example No. 1
$10,000
90 000Example No. 2
$ -0-
100 000
fl0 O00January 10, 1984
Adopted
RulesI - - L - -- - - - ~I I
9 TexReg 281
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Texas. Secretary of State. Texas Register, Volume 9, Number 3, Pages 223-296, January 10, 1984, periodical, October 1, 1984; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth243555/m1/59/: accessed April 23, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.