Federal tax considerations for life insurance
How are contributions to a tax-sheltered annuity treated with regards to taxation?
They are not included as income for the employee, but are taxable upon distribution.
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 taxable annually?
$3000
Who can make a fully deductible contribution to a traditional IRA?
An individual not covered by an employer-sponsored plan who has earned income
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is
Modified Endowment Contract
The premiums paid by the employer in a business life insurance policy are
Tax deductible by the employer
Which of the following statements regarding the taxation of modified endowment contract is false?
Withdrawals are not taxable.
Under a simple plan, which of the following is true regarding taxation on both contributions and earnings?
they are tax deferred until withdrawn
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?
Profit sharing plan. A profit sharing plan is one where the employer will contribute monies into an employee's retirement plan when the company shows a profit. The others are all qualified plans, but company profit isn't an issue with them.
Which of the following is not true regarding a non-qualified retirement plan?
It needs IRS approval
An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?
$3,000
Which of the following is true regarding taxation of dividends in participating policies?
Dividends are not taxable.
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?
income tax on distributions and no penalty
When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?
Interest only
All of the following would be eligible to establish a Keogh retirement plan except
The president and employee of one's family's corporation.
Employer contributions made to a qualified plan
Are subject to vesting requirements