Free Federal Tax Considerations Practice Questions
Arizona Life exam (series 13-31) — 82 practice questions.
Subtopics: Death benefit taxation, Cash value growth, 1035 exchange, Modified endowment contract, Annuity taxation, Qualified plans, Premium deductibility, Dividends taxation, Traditional IRA, Roth IRA, Qualified plan contributions, Rollover vs transfer, 403b, Transfer-for-value rule, Estate inclusion incidents of ownership, Three-year rule, Section 79 group term, Key person policy taxation, Life policy withdrawal basis recovery, Required minimum distributions, SEP IRA, 1035 exchange life-to-life, 401k salary deferral, Policy loan taxation, Surrender gain, Surrender calculation, Lapse with loan, Dividend interest taxation, Estate inclusion transfer, ILIT, Gift tax exclusion 2026, Estate tax exemption 2026, Marital deduction, MEC 7-pay test, MEC death benefit, MEC loans, MEC permanence, Annuity withdrawal exception, Annuity basis recovery, 1035 annuity to life, 1035 same insured, Traditional IRA limit 2026, IRA catch-up 2026, 401k deferral 2026, Super catch-up, IRA contribution earned income, IRA age limit, IRA deductibility, IRA early withdrawal, IRA penalty exceptions, Roth qualified distribution, Roth RMDs, Roth contributions basis, Indirect rollover, One rollover per year, Mandatory withholding, Inherited IRA 10-year rule, RMD failure penalty, RMD age born 1960, ERISA, Qualified plan requirements, Vesting, DC vesting schedules, Defined benefit plan, Defined contribution plan, Profit-sharing plan, SIMPLE plan eligibility, SIMPLE early withdrawal, SEP contributions, Keogh plan, 457 plan, Qualified plan loans, Employer-owned life insurance, Buy-sell premiums, Group term over 50k, Group premium deduction, Transfer for value exceptions, Life settlement taxation
Read the Federal Tax Considerations study guide
Sample questions & answers
1. Life insurance death benefits paid to a named beneficiary by reason of the insured's death are generally:
Excluded from the beneficiary's gross income
26 U.S.C. 101(a) excludes from gross income amounts received under a life insurance contract paid by reason of the insured's death.
2. The cash value inside a permanent life insurance policy generally grows:
Tax-deferred
Inside buildup is not taxed while it remains in the policy; amounts are taxed under 26 U.S.C. 72(e) only when distributed in excess of basis.
3. A Section 1035 exchange allows a policyowner to:
Exchange a life policy for another life policy or an annuity tax-free
26 U.S.C. 1035(a) provides that no gain or loss is recognized on exchanging a life contract for another life contract, an endowment or an annuity.
4. A life policy that fails the 7-pay test and becomes a modified endowment contract loses favorable treatment of:
Lifetime distributions, which are taxed gain first
26 U.S.C. 7702A defines a MEC by the 7-pay test; lifetime distributions from a MEC are taxed gain first and may face a 10% penalty before 59 1/2.
Practice: Federal Tax Considerations
Answer choices are shuffled every time, and every question comes with an explanation.
Practice questions are study aids generated for exam preparation and are not actual exam questions. Content is provided for educational purposes and is not legal advice. Verify current statutes, rules, and exam specifications with the Insurance Department and the exam administrator before relying on it.
