Chapter 6

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE

Withdrawals are not taxable

Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase?

Withdrawn amounts are taxed on a last in, first out basis.

Regarding annuity benefit payments, the interest earned on the principal is known as the

tax base

An individual has been diagosted with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits?

A portion of the benefit up to a limit is tax free the rest is taxable income

If an insured surrenders his life insurance 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