Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
my Life Tax
life tax
| Question | Answer |
|---|---|
| which is not a consideration of life ins proceeds in fed estate taxes The estate is the named beneficiary of the proceeds of the policy. The deceased was not the policyowner. The policy was transferred to another person within 3 years of death. | The deceased was not the policyowner. If the deceased WERE the policyowner, it would be a consideration for federal estate taxes. |
| Which of the following is taxable? Interest on life proceeds paid in installments. Dividends Accelerated benefits Policy loans | Interest on life proceeds paid in installments. |
| Group life and individual life have similarities. What is a major difference between group and life policies regarding taxation? | Premiums paid by employers are tax deductible |
| A modified endowment contract (MEC) is an over funded life policy and as such, and is subject to taxation. True or false | true |
| T or F Once an MEC, always an MEC | true |
| t or f Funds withdrawn from and MEC are subject to LIFO (Last in first out) tax treatment | true |
| t or f Any policy exchanged for an MEC is not automatically classified as an MEC | false |
| What is the tax liability on divisible surplus received by a recipient? | tax-free |
| Kevin's employer pays his premiums for the group life insurance policy. The premiums are: | Tax deductible under certain conditions |
| Angie cashes in her life policy. She had paid $10,000 in premiums and received $15,200 in cash surrender. How much of this is taxable? | $5,200 |
| In regards to taxation of life insurance: True or False There is no current taxation as cash value builds each year | true |
| In regards to taxation of life insurance: True or False The difference between premiums paid and death benefit are taxed to the spouse under a lump sum settlement | false |
| In regards to taxation of life insurance: True or False Premiums paid by an employer can be deducted by the business | true |
| In regards to taxation of life insurance: True or False Policy proceeds owned by decedent are included for estate taxes | true |
| A portion of fixed dollar life annuity payable to a retired worker is not taxable. How is the nontaxable amount determined? | an amount determined by the exclusion ratio |
| What is the tax rate for dividends received on accumulation units? | They are taxed later when the accumulation units are converted to annuity units. When the funds are withdrawn, the taxes are all calculated at the ordinary income rate. |
| Michelle received a lump sum payment from her uncle's policy (as the named beneficiary). Are the proceeds subject to taxes if the policy was purchased with after tax dollars? | The proceeds are not subject to federal income taxes if it was an individual policy purchased with after tax dollars. The proceeds may be subject to state income tax. |
| Are there limitations that when placed on Universal Life, result in favorable tax treatment? | Yes, a certain percentage of all premiums must purchase death benefits |
| Dividends are not taxable as income due to which of the following reasons: | they are a return of part of the premium paid |
| Rick is considering surrendering his life insurance policy for its cash value. What is a major consideration that could affect his decision to do this surrender? | The cash received in excess of the premiums paid is taxable |
| t or f If a policy becomes a modified endowment contract (MEC), the tax consequences are significant. | true |
| when can a policy owner cash in a MEC and not be assessed an additional 10% penalty | if the person is disabled |
| t or f Money distributed from a MEC is considered to come first from earnings | true |
| t or f Money distributed from a MEC is taxed as ordinary income | true |
| MECs provide a death benefit | true |
| is it true that the corridor test relates to the amount of pure insurance in a contract. If a policy fails to meet the cash value test - the tax implications are significant. | yes |
| t or f The corridor test deals with the relationship between the cash value and death benefit at a point in time | true |
| t or f corridor test; After age 60 the cash value ratio begins to scale down. | false After age 40 the cash value ratio begins to scale down. |
| corridor test; If an insured is 35 years old, the total death benefit cannot be less than: | 250% of the cash value |
| Corridor test; If the cash value of a 40-year-old insured's policy is $100,000, the death benefit must be at least: | $250,000 |
| In order to receive beneficial tax treatment, the guideline premium test can be applied. The ___________ is the total premium paid at one time to fund the future benefits of the contract. | Guideline single premium |
| define guideline single premium | The guideline single premium is the total premium paid at one time to fund the future benefits of the contract. |
| Life ins and annuity prems, paid by an individual, are generally not tax deductible. Which of the following premiums could be tax deductible under certain conditions? Variable life Variable universal life Retirement accounts Term | retirement accounts |
| Martin surrendered his whole life policy. The policy had a cash value of $50,000. Over the duration of the policy, Martin has paid total premiums of $42,000. What amount is subject to be taxed as ordinary income? | 8k |
| Kim surrendered her life policy for $80,000. As of the surrender date, Kim had paid in premiums totaling $65,000. Consequently Kim recognized income of $15,000 ($80,000 minus the $65,000 premiums paid). How is this income taxed? | taxed as ordinary income |
| David sold whole life contract to an unrelated person for $80,000. Premiums paid were $64,000 and the cost of insurance provided before the sale was $10,000. If the adjusted basis is $54,000, and the gain on the sale is $26,000, how is the $26,000 taxed? | It is taxed as both ordinary income and capital gains. |
| John purchased a 15-year level term contract with no cash surrender value. His monthly premiums were $500 and total premiums paid were $45,000. The policy was sold to an unrelated person resulting in a gain on the sale of $19,750. How is this gain taxed? | Long term capital gain Because the term contract had no cash surrender value, the entire $19,750 is long-term capital gain. |
| t or f In order to received the living benefits tax free, they must be qualified. | true |
| t or f the annuity investment made by the purchaser is returned in equal tax-free payments. | true |
| t or f The part of the annuity payment that qualifies as earnings is reported as income during the year that the payment(s) are received and is taxable. | true |
Created by:
100000819223738
Popular Insurance sets