Chapter 8

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 taxable annually

3000

Which concept is associated with exclusion ratio

Annuities payments

All the following are true of the federal tax advantages of a qualified plan, except

At distribution, all amounts received by the employee are tax free.

Which of the following terms is used to name the non-tax return of unused premiums

Dividends

Life insurance death proceeds are

Generally not taxed as 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.

Which of the following describes a taxation of an annuity when money is withdrawn during the accumulation phase

Withdrawn amounts are taxed on a last in, first out basis.

An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty with the IRA owner pay?

50% tax on the amount not distributed as required

Which of the following statements regarding deferred compensation fund is incorrect

They are usually qualified plans

During the accumulation period in a nonqualified annuity, what are the tax consequences of a withdrawal?

Taxable interest will be withdrawn first and the 10% penalty will be imposed if under age 59 ½. (When money is withdrawn from the annuity during the accumulation phase, the amounts are taxed on a last in first out basis (LIFO). Therefore, all withdrawals will be taxable until the owner's cost basis is reached.)

And annuitant dies before the effective date of a purchased annuity. Assuming that the annuitants wife is the beneficiary what will occur

The interest will continue to accumulate tax deferred

What method is used to determine the tax portion for each annuity payment?

Exclusion ratio