Life Insurance: Federal Tax Considerations for Life Insurance and Annuities Quiz
When the owner of a $250,000 life insurance policy died, the beneficiary decided to leave the proceeds of the policy with the insurance company and selected be interested in an option. If at the time of withdrawal, the interest paid was $11,000, the beneficiary would be required to pay income tax on.
$11,000
A policy owner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. This nontaxable transaction is called
1035 Exchange
Which of the following is not an allowable 1035 exchange?
A Whole life insurance policies exchange for term Insurance policy
Who can make a fully deductible contribution to a traditional IRA?
An individual not covered by an employer - sponsored plan, who has earned income
Who can make a fully deductible contribution to a traditional IRA?
An individual not covered by an employer-sponsored plan who has earned income
Which concept is associated with "exclusion ratio "?
Annuity payments
When must an IRA be completely distributed with a beneficiary is not named?
December 31 of the year that contains the fifth anniversary of the owners death
Which of the following terms is used to name the nontaxed return of unused premiums?
Dividend
Which of the following is true regarding taxation of dividends from participating policies?
Dividends are not taxable
Which of the following is true regarding taxation of dividends in participating policies?
Dividends are not taxable
Life insurance death proceeds are
Generally not taxed as income
In life insurance policies, cash value increases
Grow tax deferred
What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred by the beneficiary?
Income tax on distributions and no penalty
What is the tax consequence of amount received from a traditional IRA after the money was left in the text Dash deferred account by the beneficiary?
Income tax on distributions no penalty
A beneficiary receives payments, consisting of a principal and interest portions, which part are tax was income?
Interest only
If an insured surrenders his life policy, which statement is true regarding the cash value of the policy?
It is only taxable if the cash value exceeds the amount paid for premiums
Which of the following statements is true concerning whole life insurance?
Loan Dash some death benefits are not taxable:
Which of the following statements is TRUE concerning whole life insurance?
Lump-sum death benefits are not taxable
Which of the following is not true regarding policy loans
Money borrowed from the cash value is taxable
Which of the following is not true regarding policy loans?
Money borrowed from the cash value is taxable
Death benefits, payable to a beneficiary under a life insurance policy are generally?
Not subject to income tax station by the federal government
Traditional IRA contributions are tax deductible based on which of the following?
Owner's income
Traditional IRA contributions are tax deductible based on which of the following?
Owners Income
Traditional IRA contributions are tax deductible based on which of the following?
Owners income
If taken as a lump sum, life insurance proceeds to beneficiaries are passed
Free of federal income taxation
What part of Internal Revenue Code allows an owner of a life insurance policy or annuity to exchange or replace their current contract with another contract without creating adverse tax consequences?
Section 1035 Policy Exchange
An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the interest accumulated in the annuity not be taxable?
Spouse
What type of annuity activity will cause the media taxation of the interest earned
Surrendering the annuity for cash
Which of the following best describes taxation during the accumulation period of an annuity?
Taxes are deferred:
What method is used to determine the taxable portion of each payment?
The exclusion ratio
Annuitant dies before the effective date of a purchased annuity. Assuming that the newtons wife is the beneficiary, what will occur?
The interest will continue to accumulate tax deferred
Annuitant dies before the effective date of a purchased annuity. Swimming that the Newton's wife is the beneficiary what will occur?
The interest will continue to accumulate tax deferred
An insurer decides to surrender his $100,000 whole life policy. The premiums paid into the policy added up to $15,000. A policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?
$3000
Which of the following best describes taxation during the accumulation period of an annuity?
Taxes are deferred
If taken as a lump sum, Life Insurance proceeds to beneficiaries are passed
Free of federal income taxation
If an immediate annuity is purchased with a face amount at death, or with the cash value at surrender, this would be considered
Settlement options
What type of annuity activity will call him media taxation of interest earned?
Surrendering the cash
During the accumulation period in a nonqualified annuity, what are the tax consequences of withdrawal?
Taxable interest will be withdrawn first and the 10% penalty will be imposed it under age 59 1/2
Jay 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 Jay's taxable estate
What method is used to determine the taxable portion of each annuity payment?
The exclusion ratio
When would life insurance policy proceeds be included in the insurance and taxable estate?
When there are any incidents of ownership at the time of death
When would life insurance policy proceeds be included in the insured's taxable estate?
When there are any incidents of ownership at the time of death
Which of the following describes the taxation of an annuity when the money is withdrawn during the accumulation phase?
Withdrawn amounts are taxed on a last in first out basis
Which of the following describes the taxation of an annuity, when money is withdrawn during the accumulation phase?
Withdrawn amounts are taxed on a last in, first out basis
If $100,000 of life insurance proceeds were used in a settlement option, which paid 13,000 per year for 10 years, which of the following would be tax for annually?
$3000