Life Insurance chapter 6

in life insurance policies, cash value increases

Grow tax deferred.

J transferred his life insurance policy to his son two years before his death. Which of the following is true?

The entire face value of the policy will be included in J's taxable estate

Traditional IRA Contributions are tax deductible based on what

The owners 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

settlement option

when money is withdrawn from the annuity during the accumulation phase...

the amounts are taxed on a last in, first out basis

which of the following statements regarding the taxation of modified endowment contracts is false?

withdrawls are not taxable

what is the penalty for IRA distributions that are below the required minimum for the year?

50%

An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay?

50% tax on the amount not distributed as required

in a direct transfer, how is money transferred from one retirement plan to a traditional IRA

from trustee to trustee

Who can make a fully deductible contribution to a traditional IRA?

individuals who are not covered by an employer-sponsored plan and have earned income

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?

interest only

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is

modified endowment contract

When must an IRA be completely distributed when a beneficiary is not named?

on or before december 31 of the calander year that contains the fifth anniversary of death

what part of the internal revenue code allows an owner of a life insurance policy or annuity to exchange or replace their current contract with another without creating adverse tax consequences?

section 1035 policy exchange

which of the following best describes taxation during the accumulation period of an annuity?

taxes are deferred