Free Federal Tax Considerations Practice Questions
Vermont Life, Accident & Health exam (series 14-29) — 49 practice questions.
Subtopics: Transfer for value, Estate inclusion, MEC distributions, Qualified plan contributions, Employer-paid disability benefits, Life insurance, Annuities, Premium deductibility, Policy dividends, Disability benefits, Group term life, Executive bonus, Qualified plans, Nonqualified plans, Health insurance, Disability income, HSA, Long-term care, 1035 exchanges
Read the Federal Tax Considerations study guide
Sample questions & answers
1. The transfer-for-value rule may cause life insurance death proceeds to become taxable when:
A policy is sold or transferred for valuable consideration to certain parties
Under the transfer-for-value rule, selling a policy for consideration can make part of the death benefit taxable, subject to exceptions.
2. Life insurance death proceeds may be included in the insured's taxable estate when the insured:
Held incidents of ownership in the policy at death
If the insured retained incidents of ownership, the proceeds are generally included in the gross estate for federal estate tax.
3. Lifetime distributions from a modified endowment contract (MEC) are generally taxed:
On a last-in, first-out basis, with gains taxed first
MEC distributions use last-in, first-out taxation, so taxable gains come out first and may also incur a penalty before age 59 and a half.
4. Contributions to a traditional qualified retirement plan are generally:
Made with pre-tax dollars, with distributions taxed later
Traditional qualified plan contributions are typically pre-tax, and distributions are taxed as ordinary income when received.
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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.
