Federal tax considerations for life insurance and annuities
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 is not true regarding policy loans
Money borrowed from the cash value is taxable.
which of the following describes the taxation of an annuity when money is withdrawn during an accumulation phase
withdrawn amounts are taxed on last in first out basis
when would life insurance policy proceeds be included in the insured's taxable estate
when there any incidents of ownership at the time of death
if $100,000 of life insurance proceeds were used in a settlement options which paid $13,000 per year for 10 years which of the following would be taxable annually
$3000
which of the following is true regarding taxation of dividends in participating policies?
Dividends are not taxable.
what method is used to determine the taxable portion of each annuity payment?
Exclusion ratio
which of the following best describes taxation during the accumulation period of an annuity
Taxes are deferred
which of the following is used to determine the annuity amounts that are not taxable?
exclusion ratio
an applicant buys a nonqualified annuity but dies before the starting date. For which of the following beneficiaries with the interest accumulated in the annuity not be taxable
spouse
when the owner of a $250,000 life insurance policy died them in officially decide to leave the proceeds of the policy with the insurance company and selected the interest on that option if at the time of withdrawal the interest paid was $11,000 the beneficiary would be required to pay income tax on
$11,000
A policy owner canceled his life policy but instruct stanchions company to transfer the cash value of his policy to an annuity. This nontaxable transaction is called
1035 exchange
which of the following is not an allowable 1035 exchange?
A whole life insurance policy is exchanged for a term insurance policy
Life insurance death proceeds are
Generally not taxed as income
what is the main purpose of the 7 pay test?
It determines if the insurance policy is MEC
