Tax Considerations for Life
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a A. settlement option B. nontaxable exchange C. nonforfeiture option D. rollover
A
Which of the following statements regarding the taxation of modified endowment contracts is FALSE? A. distributions before age 59.5 incur a 10% penalty on policy gains B. policy loans are taxable distributions C. accumulations are tax deferred D. withdrawals are not taxable
D
A 403b plan, commonly referred to as a TSA, is available to be used by A. government workers B. postal workers C. self-employed persons D. teachers and not-for-profit organizations
D
Which of the following terms is used to name the nontaxed return of unused premiums? A. dividend B. premium return C. interest D. surrender
A
All of the following would be different between qualified and nonqualified retirement plans EXCEPT A. IRS approval requirements B. taxation on accumulation C. taxation of withdrawals D. taxation of contributions
B deferred in both types
For a retirement plan to be qualified, it must be designed for the benefit of A. employer B. IRS C. employees D. key employee
C
An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n) A. Keogh plan B. Roth IRA C. SEP D. 403b Plan
D
Who can make a fully deductible contribution to a traditional IRA? A. anybody: all IRA contributions are fully deductible regardless of income level B. someone making contributions to an education IRA C. a person whose contributions are funded by a return on investment D. an individual not covered by an employer-sponsored plan who has earned income
D
Which of the following terms is used to name the nontaxed return of unused premiums? a. interest b. surrender c. dividend d. premium return
C
All of the following are general requirements of a qualified plan EXCEPT A. the plan must be communicated to all employees B. the plan must be for the exclusive benefits of the employees and their beneficiaries C. the plan must be permanent, written and legally binding D. the plan must provide an offset for social security benefits
D
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a A. rollover B. settlement option C. nontaxable exchange D. nonforfeiture option
B
A tax-sheltered annuity is a special tax-favored retirement plan available to A. certain age groups only B. certain groups depending on factors such as race, gender, and age C. certain groups of employees only D. anyone
C
All of the following are true of the federal tax advantages of qualified plan EXCEPT a. employee and employer contributions are not counted as income to the employee for income tax purposes B. at distribution, all amounts received by the employee are tax free C. employer contributions are tax deductible as ordinary business expense D. funds accumulate on a tax deferred basis
B at distribution, any amount received by the employee will be treated as ordinary income for tax purposes
Which of the following describes the tax advantage of a qualified retirement plan? A. distributions prior to 59.5 are tax deductible B. employer contributions are deductible as business expense when the employee receives benefits C. employer contributions are not taxed when paid out to the employee D. the earnings in the plan accumulate tax deferred
D
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is A. multiplicative policy B. modified endowment contract C. accelerated policy D. endowment
B
Under the 401(k) bonus or thrift plan, the employer will contribute A. an undetermined percentage for each dollar contributed by the employee B. all of the money to the plan C. 30% of what the employee contributes D. 75% of what the employee contributes
A
All of the following statements are true regarding tax-qualified annuities except A. withdrawals are taxed B. employer contributions are not tax deductible C. annuity earnings are tax deferred D. they must be approved by the IRS
B
How are contributions to a tax-sheltered annuity treated with regards to taxation? A. taxed as income for employee, but tax free upon withdrawal B. not included as income for the employee, but taxable upon distribution C. never taxed D. taxed as income for employee
B
If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually A. $7000 B. $3000 C. $13000 D. $10000
B
Which of the following is true concerning whole life insurance? A. policy loans are tax deductible B. lump-sum death benefits are not taxable C. dividend interest is not taxable D. premiums are tax deductible
B
When must an IRA be completely distributed when a beneficiary isn't named? A. Dec 31 of year following owner's death B. due date of the deceased owner's final tax return including extensions C. Dec 31 of the year that contains the fifth anniversary of the owner's death D. due date of beneficiary's tax return including extensions
C
An individual has been contributing to a retirement account after taxes are taken out of his paycheck. His financial advisor told him that he will be allowed to make contributions after age 70.5 The account owner doesn't have to pay taxes on the growth of his account. What type of retirement account is it? A. 403b B. Simplified Employee Pension Plan C. traditional IRA D. Roth IRA
D
In life insurance policies, cash value increases A. are income taxable immediately B. are taxed annually C. are only taxed when the owner reaches age 65 D. grow tax deferred
D
What is the main purpose of the Seven-Pay test? A. requires level premium payments for 7 years B. ensures policy benefits are paid out in 7 years C. guarantees interest minimum D. determines if the insurance policy is an MEC
D
Which of the following is true regarding taxation of accelerated benefits under a life insurance policy? A. they are always taxable to chronically ill insured B. they are always taxed C. there is a 10% penalty for early distribution of the death benefit D. they are tax free to terminally ill insured
D
A 60-year-old participant in a 401K takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true? A. the amount of distribution is reduced by the amount of a 20% withholding tax B. no taxes are due since the participant is over age 59.5 C. there is a 10% early withdrawal penalty D. the amount distributed is subject to ordinary income tax
A
All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT A. funds accumulated on a tax-deferred basis B. employee and employer contributions are not counted as income to the employee for income tax purposes c. at distribution, all amounts received by the employee are tax free d. employer contributions are tax deductible as ordinary business expense
C
If a retirement plan or annuity is qualified, this means a. it accepts after-tax contributions b. it is noncancellable c. it is approved by the IRS d. it has a penalty for early withdrawal
C
What type of retirement account allows contributions to continue beyond age 70.5 and does not force distributions to start at age 70.5? A. standard IRA B. traditional IRA C. Roth IRA D. flexible IRA
C
Life insurance death proceeds are A. taxed as ordinary income B. generally not taxed as income C. taxable to the extent that they exceed 7.5% of the beneficiary's adjusted gross income D. taxed as a capital gain
B
Traditional IRA contributions are A. partially taxable depending on the income level B. tax deductible C. deducted based on the income level D. never tax deductible
B
What is the tax consequences of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary? A. capital gains tax on distributions plus 10% penalty B. income tax on distributions and no penalty C. income tax on distributions plus 10% penalty D. capital gains tax on distributions and no penalty
B
