Business Insurance

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT A. The policy is owned by the company B. Any type of insurance policy may be used C. The employer pays a bonus to a selected employee to fund the policy D. It is considered a non-qualified employee benefit

A. The policy is owned by the company

Which of the following would describe a legal document which would dictate who can buy a deceased partners share of a business and for what amount? A. Split dollar agreement B. Buy-sell agreement C. Profit and loss agreement D. Key person agreement

B. Buy-sell agreement

A key person insurance policy can pay for which of the following? A. Workers compensation B. Hospital bills of the key employee C. Costs of training a replacement D. Loss of personal income

C. Costs of training a replacement

Which of the following statements regarding deferred compensation funds is INCORRECT? A. They are usually qualified plans B. They can be established by employers C. They can be made with case deposits to an annuity D. They generally provide additional retirement benefits

A. They are usually qualified plans

Which is INCORRECT concerning a Section 457 Deferred Compensation plan? A. It is a means of deferring current income until later when the employee is in a lower tax bracket B. It has a vesting requirement C. The deferred amount is paid upon death, disability, or retirement D. It is a non-qualified plan

B. It has a vesting requirement

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? A. Term insurance only B. Permanent insurance only C. Universal life insurance only D. Any form of life insurance

D. Any form of life insurance

All of the following are business uses of life insurance EXCEPT A. Compensating executives B. Funding against financial loss caused by the death of a key employee C. Funding business continuation agreements D. Funding against company's general financial loss

D. Funding against company's general financial loss

Which of the following statements concerning buy-sell agreements is true? A. Premiums paid are deductible as a business expense B. Benefits received are considered income taxable C. Buy-sell agreements pay in the event of a medical emergency D. Buy-sell agreements are normally funded with a life insurance policy

D. Buy-sell agreements are normally funded with a life insurance policy

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? A. Premiums are tax deductible by the key employee B. Premiums are tax deductible as a business expense C. Premiums are taxable to the employee D. Premiums are not tax deductible as a business expense

D. Premiums are not tax deductible as a business expense

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then A. The benefit is subject to the exclusionary rule B. IRS has no jurisdiction C. The benefit is received as taxable income D. The benefit is received tax free

D. The benefit is received tax free