Federal Tax Consideration

All of the following would be different between qualified and non qualified retirement plans except A taxation of withdrawals B taxation of contributions C irs approval requirements D taxation on accumulation

D taxation on accumulation

All of the following are general requirements of a qualified plan except a. the plan must be communicated to all employees b. the plan must be for the exclusive benefits of the employees and their beneficiaries c. the plan must be permanent, written and legally bidning d. the plan must provide an offset for social security benefits

d. the plan must provide an offset for social security benefits

All of the following statements are true regarding tax-qualified annuities except A employer contributions are not tax deductible B annuity earnings are tax deferred C they must be approved by the irs D withdrawals are raxed

A employer contributions are not tax deductible

Which of the following terms is used to name the non taxed return of unused premiums? A surrender B dividends C premium return D interest

B dividends

All of the following are true of the federal tax advantages of a qualified plan except A funds accumulate on a tax-deferred basis B employee and employer contributions are not counted as income to the employee for income tax purposes C at distribution, all amounts received by the employee are tax free D employer contributions are tax deductible as ordinary business expenses

C at distribution, all amounts received by the employee are tax free

The advantage of qualified plans to employers is a. taxable contriubtions b. tax-deductible contributions c. tax-free earnings d. no lump-sum payments

b. tax-deductible contributions

Employer contributions made to a qualified plan a. may discriminate in favor of highly paid employees b. are after tax contributions c. are taxed as annually as salary d. are subject to vesting requirements

d. are subject to vesting requirements

For a retirement plan to be qualified, it must be designed for the benefit of a. key employee b. employer c. IRS d. employees

d. employees

All of the following statements are true regarding tax-qualified annuities except a. annuity earnings are tax deferred b. they must be approved by the IRS c. withdrawals are taxed d. employer contributions are not tax deductible

d. employer contributions are not tax deductible

Death benefits payable to a beneficiary under a life insurance policy are generally A exempt from income taxation if under $10,000 B exempt from income taxation if over $10,000 C not subject to income taxation by the federal government D subject to income taxation by the federal gov

C not subject to income taxation by the federal government

An internal revenue code provision that specifically provides for an individual retirement plan for public school teachers is a(n) a. Keogh plan b. roth IRA c. SEP d. 403(b) plan (TSA)

d. 403(b) plan (TSA)

an individual has been diagnosed with Alzheimer's disease. he is insured under a life insurance policy with the accelerated benefits rider. which of the following is true regarding taxation of the accelerated benefits? a. a portion of the benefit up to a limit is tax free; the rest is taxable income b. principal is tax free, but interest is taxed c. the entire benefit will be received tax free d. the entire living benefit is considered taxable income

a. a portion of the benefit up to a limit is tax free; the rest is taxable income

if an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a a. rollover b. settlement option c. nontaxable exchange d. nonforfeiture option

b. settlement option

A 60 yr old participant in a 401k plan takes a distribution and rolls it over to IRA within 60 days. Which of the following is true? A the amount of the distribution is reduced by the amount of a 20% withholding tax B no taxes are due since the plan participant is over age 59 1/2 C there is a 10% early withdrawal penalty D the amount distributed is subject to ordinary income tax

A the amount of the distribution is reduced by the amount of a 20% withholding tax

life insurance death proceeds are a. generally not taxed as income b. taxable to the extent that they exceed 7.5% of the beneficiary adjusted gross income c. taxed as a capital gain d. taxed as ordinary income

a. generally not taxed as income

If taken as a lump sum, life insurance proceed to beneficiaries are passed a. without interest b. free of federal income taxation c. tax-deductible d. part tax-free and part taxable

b. free of federal income taxation

What is the main purpose of the seven-pay test? a. it guarantees the minimum interest b. it determines if the insurance policy is a MEC c. it requires level premium payments for 7 yrs d. it ensures that the policy benefits are paid out in 7 years

b. it determines if the insurance policy is a MEC

Which of the following is true of a qualified plan? a. it may allow unlimited contributions b. it has a tax benefit for both employer and employee c. it does not need to have a vesting schedule d. it may discriminate in favor of highly paid employees

b. it has a tax benefit for both employer and employee

Which of the following is true regarding taxation of dividends in participating policies? A dividends are taxable only after a certain amount is accumulated annually B dividends are taxable in some life insurance policies and nontaxable in others C dividends are considered income for tax purposes D dividends are not taxable

D dividends are not taxable

Which of the following is true regarding taxation of accelerated benefits under a life insurance policy? a. they are always taxable to chronically ill insured b. they are always taxed c. there is a 10% penalty for early distribution of the death benefit d. they are tax free to terminally ill insured

d. they are tax free to terminally ill insured

When must an IRA be completely distributed when a beneficiary is not named? A dec 31 of the year following the years of the owners death B due date if the deceased owners final tax return including extensions C December 31 of the year that contains the fifth anniversary of the owners death D due date of beneficiary's tax return including extensions

C December 31 of the year that contains the fifth anniversary of the owners death

Life insurance death proceeds are a. taxable to the extent that they exceed 7.5% of the beneficiary's adjusted gross income b. taxed as a capital gain c. taxed as ordinary income d. generally not taxed as income

d. generally not taxed as income

if $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually? a. $3,000 b. $13,000 c. $10,000 d. $7,000

a. $3,000

What is the tax consequence of amounts received from a traditional ira after the money was left in the tax-deferred account by the beneficiary? A capital gains tax on distribution and no penalty B capital gains tax on distributions plus 10% penalty C income tax on distributions and no penalty D income tax on distributions plus 10% penalty

C income tax on distributions and no penalty

How are contributions to a tax-sheltered annuity treated with regards to taxation? a. they are taxed as income for the employee, but are tax free upon withdrawal b. they are not included as income for the employee, but are taxable upon distriubtion c. they are never taxed d. they are taxed as income for the employee

b. they are not included as income for the employee, but are taxable upon distriubtion

An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? a. $8000 tax on growth only b. $10000 tax on growth only c. $10000 no tax consequences d. $8000 no tax consequences

c. $10000 no tax consequences

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income? a. neither principal nor interest b. principal only c. interest only d. both principal and interest

c. interest only

Which of the following statements regarding the taxation of modified endowment contracts is false? a. policy loans are taxable distributions b. accumulations are tax deferred c. withdrawals are not taxable d. distributions before age 59 1/2 incur a 10% penalty on all policy gains

c. withdrawals are not taxable

When the owner of a $250000 life insurance police died, the beneficiary decided to leave the proceeds of the policy with the insurance company and selected the interest settlement option. if at the time of withdrawal the interest paid was $11000, the beneficiary would be required to pay income tax on a. none, bc the beneficiary has not received the death benefit b. $261,000 c. $239,000 d. $11,000

d. $11,000