Free Federal Tax Considerations Practice Questions
Virginia Life exam (series 11-05) — 79 practice questions.
Subtopics: Death benefit, Cash value growth, Annuity taxation, MEC, Death benefit taxation, Premium deductibility, Dividends taxation, Modified endowment contract, 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 proceeds paid in a lump sum to a named beneficiary are generally:
Received free of income tax
Life insurance death proceeds paid in a lump sum to a named beneficiary are generally excluded from the beneficiary's gross income (IRC § 101(a)).
2. Cash value growth inside a life insurance policy is generally:
Tax-deferred while left in the policy
Increases in cash value accumulate tax-deferred inside the policy; tax can apply to gains on surrender or certain withdrawals.
3. During the payout phase of a nonqualified annuity the portion representing earnings is:
Taxable as ordinary income
Annuity payments are split by the exclusion ratio: the return of investment is not taxed and the earnings portion is ordinary income.
4. A life insurance policy classified as a Modified Endowment Contract (MEC) loses favorable tax treatment on:
Loans and withdrawals, taxed gain-first
A MEC fails the seven-pay test; living distributions such as loans and withdrawals are taxed gain-first and may carry a 10% penalty before age 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.
