Chapter VI Federal Tax Consideration for Life Insurance (5 Exam Questions)

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?

$3000

Which of the following terms is used to name the nontaxable return of unused premiums?

Dividend

What qualifies an individual to contribute to an IRA?

Earned income

For a retirement plan to be qualified, it must be designed for whose benefit?

Employee

When a beneficiary is a life insurance policy receives payments consisting of both primal and interest portions what will be taxed as income?

Interest only

Generally, the premium for personal life insurance is?

Not tax deductible

Which of the following retirement plans is for nonprofit, charitable, educational or religious organizations?

Tax Sheltered Annuity 403(b)

If life insurance policy, cash value increases are

Tax deferred

A policy owner cancels his life policy but instructs the insurance company to transfer the cash value of the policy to an annuity. This nontaxable transaction is called?

1035 Exchange

Excess contributions to a Roth IRA are subject to what tax penalty?

6%

Which of the following is NOT true regarding policy loans?

An insurer can charge interest on outstanding policy loans

The 10% early withdrawal penalty from an IRA can be waived for?

Catastrophic medical expense

Avoiding tax consequences when transferring assets from one IRA to another can be accomplished by which of the following?

Direct rollover from one plan to the other

For personal life insurance, the lump sum death benefit is received

Tax Free

What is the primary purpose of a 401K plan?

To accumulate retirement savings