[SVL] Insurance 10

1. All of the following statements regarding tax treatment of individual life insurance policies
are correct EXCEPT
A. policy loans are not taxable
B. cash value is not taxable as long as it stays in the policy
C. premiums are tax deductible
D. when a life insurance policy is surrendered for its cash value, only the gain is taxable

2. For tax purposes, which of the following are considered to be a return of a portion of the premium paid for the policy?
A. Policy loan
B. Death benefits
C. Cash value
D. Dividends

1. None of the following premiums are tax deductible for a business EXCEPT
A. key person life insurance policy premiums
B. premiums paid for life insurance that ends up reimbursing the company
C. premiums paid in a buy-sell agreement
D. premiums paid for an executive bonus plan

2. All of the following statements regarding taxation of annuities are correct EXCEPT
A. annuity premiums are not tax deductible, unless the annuity is held in a qualified retirement plan
B. if death occurs during the accumulation period, proceeds paid in a lump sum to the beneficiary are never taxable
C. gain in an annuity or life insurance contract is taxable when a policy is surrendered
D. interest earning credited to annuities are not taxable as long as they stay in the policy

Which of the following would NOT qualify as a
1035 exchange?
A. A life insurance policy to an annuity contract
B. An annuity contract to a life insurance policy
C. A cash value life insurance policy to another cash value life insurance policy
D. An annuity contract to another annuity contract affect

The penalties assessed against MECs primarily
A. the cost basis of the policy
B. money taken out of the policy
C. the death benefits of the policy
D. money put into the policy

As a general rule, for federal tax purposes
A. neither life insurance nor annuity premiums is tax deductible
B. life insurance premiums are tax deductible but annuity premiums are not
C. annuity premiums are tax deductible but life insurance premiums are not
D. both life insurance and annuity premiums are tax deductible

Billy is receiving the proceeds of a life insurance policy as an income stream over a period of several years. What part of the money will be subject to tax?
A. Only the part that represents the original death benefit and not the income earned on the original death benefit
B. Only the part that represents income earned on the original death benefit
C. None of it; it is life insurance proceeds
D. All of it; it is being paid out in an incomestream

For accelerated death benefits to receive the same tax treatment as regular death benefits the insured must be certified to have an illness or physical condition that can reasonably be expected to result in death within
A. 24 months
B. 9 months
C. 12 months
D. 36 months

All of the following statements regarding tax treatment of group life insurance are true
ЕХСЕРТ
A. group life insurance premiums paid by the employer are not tax-deductible as a business expense
B. if a group plan is contributory, the portion paid by the employee is not tax-deductible
C. premiums for any additional coverage above $50,000 are taxable as income to an employee
D. premiums for the first $50,000 of coverage is not taxable to the employee

An individual choose to receive money from their annuity during the accumulation period.
What is the penalty tax that must be paid in addition to regular taxes due on the taxable amount received?
A. 10%
B. 6%
C. 3%
D. 5%

What is the name of the test that is done on a life insurance policy to see if it premiums exceed those needed to fully pay up a death benefit with seven level annual payments?
A. Seven-pay test
B. Accumulation test
C. Endowment test
D. Annuitization test

All of the following statements regarding a modified endowment contract (MEC) are true
EXCEPT
A. withdrawals are taxed on a last-in-first-out basis
B. withdrawals are taxed on a first-in-first-out basis
C. once a policy is an MEC, it will always be an MEC
D. policy loans and dividends are taxed the same as withdrawals

The amount of an annuity payout option or a life insurance settlement option that is taxable gain is determined by using the
A. investment in the contract ratio
B. cost basis ratio
C. expected return ratio
D. exclusion ratio