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Taxable interest will be withdrawn first and the 10% penalty will be imposed if under age 59 ½. (When money is withdrawn from the annuity during the accumulation phase, the amounts are taxed on a last in first out basis (LIFO).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.)
Which concept is associated with "exclusion ratio"?
Annuity Payments
All of the following are general requirements of a qualified plan EXCEPT
The plan must provide an offset for social security benefits.
What type of annuity activity will cause immediate taxation of the interest earned?
Surrendering the annuity for cash
Life Insurance death proceeds are
Generally not taxed as income
Which of the following is TRUE of a qualified plan?
It has a tax benefit for both employer and employee.
Employer contributions made to a qualified plan
Are subject to vesting requirements
In a direct transfer, how is money transferred from one retirement plan to a traditional IRA
From trustee to trustee
An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?
$3,000
In life Insurance policies, cash value increases
Grow tax deferred.
What part of the Internal Revenue Code allows an owner of a Life Insurance policy or annuity to exchange or replace their current contract with another contract without creating adverse tax consequences?
Section 1035 Policy Exchange
Which of the following terms is used to name the nontaxed return of unused premiums?
dividend
Which of the following is true regarding dividends in participating policies?
Dividends are not taxable
When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distributions?
Distributions are taxable
Which of the following best describes taxation during the accumulation period of an annuity?
Taxes are deferred