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