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C. Investment Rates
The pretax and after-tax investment rates22 Mercer used in the
1991-94 valuation reports were as follows:
1991 1992 1993 1994
Pretax rate 9.0% 8.0% 6.0% 6.0%
After-tax rate 5.5 4.9 3.6 3.6
The after-tax investment rate was determined by applying a tax rate
of 39 percent for 1991-92 and 40 percent for 1993-94.
In the notices of deficiency, respondent did not dispute the
actuarial assumptions, including the pretax and after-tax
investment rates, Mercer used in the 1991-94 valuation reports. In
an amended answer, however, respondent asserted that the pretax
investment rates used in the 1993 and 1994 calculations and the
after-tax investment rate used in the computation for all years
1991-94 were too low.
Respondent asserts that the pretax and after-tax rates Mr.
Daskais proposed are reasonable and demonstrate that the rates
petitioners used are unreasonable. The pretax and after-tax
investment rates Mr. Daskais proposed are as follows:
1991 1992 1993 1994
Pretax rate 9.0% 8.0% 8.0% 7.0%
After-tax rate 6.6 6.0 5.7 4.9
Mr. Daskais determined the after-tax investment rates by
applying a tax rate of 29 percent for 1991-92 and 31.9 percent for
22 Unless otherwise indicated, all rates are rounded to the
nearest tenth of 1 percent.
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