Wow

Question 1

Key person dies=

Answer 1

Tax-free BENEFIT

Question 2

When employer gives Emp wage increase in amount of premium on new life ins polic this is

Fraternal association
Aleatory contract
Executive bonus

Answer 2

Executive bonus

Question 3

All following true re executive bonus except

It is not considered non qualified employee benefit
Owned by company
Any type of ins policy may be used
Emp pays bonus to selected employee to fund policy

Answer 3

Policy is owned by the company

Question 4

Partnership buy sell agreement in which each partner purchases ins on life of each other partner is called

Key person plan
Cross purchase plan
Split dollar plan

Answer 4

Cross purchase plan

Question 5

In exec bonus plan who is owner of policy and who pays premium

Exec is owner and exec pays premium
Company is owner but exec pays premium
Board of directors is owner and board pays premium

Answer 5

Exec owner and exec pays premium

Question 6

Key person life ins policy dies =

Answer 6

Premiums not tax deductible as business expense

Question 7

Owner of 250000 life ins policy died beneficiary left proceeds with ins company and selected interest settlement option
Interest paid was 11000
Beneficiary would be required to pay income tax on

261000
239000
None
11000

Answer 7

11000

Death benefit is not income taxable; interest is income taxable

Question 8

If taken as lump sum life ins proceeds to beneficiaries are passed

Free of fed income taxation
Tax deductible
Without interest

Answer 8

Free of federal income taxation

Question 9

Which true concerning whole life ins

Premiums are tax deductible
Policy loans are tax deductible
Lump sum death benefits are not taxable

Answer 9

Lump sum death benefits are not taxable

Question 10

Lump sum cash payment of life policy proceeds are tax free for

Answer 10

Beneficiary

Question 11

In life ins policies cash value increases

Are taxed annually
Are only taxed when owner reaches65
Grow tax deferred
Are taxable immediately

Answer 11

Grow tax deferred

Question 12

Used to name non taxed return of unused premiums

Pemium return
Interest
Surrender
Dividend

Answer 12

Dividend

Question 13

True concerning whole life ins

Premiums tax deductible
Loans are tax deductible
Lump sum death benefits not taxable

Answer 13

Lump sum death benefits are not taxable

Question 14

True regarding taxation of dividends participating in policies

Dividends are income for tax purposes
Dividends are not taxable
Dividends are taxable only after certain amount is accumulated annually
Dividends are taxable in some life ins policies and non taxable in others

Answer 14

Dividends are not taxable

Since they are return of unused premiums
Interest is subject

Question 15

Not true re policy loans

Money borrowed from cash value is taxable
Loans can be repaid at death
Insurer can charge interest on outstanding policy loans
Policy loan may be repaid after policy is surrendered

Answer 15

Money borrowed from cash value is taxable

Can be repaid at any time including surrender and death
Can barge interest on outstanding policy loans

Question 16

Insured surrenders his 100000 whole life policy; premiums paid added up to 15000; at surrender cash value was 18000. What part of surrender would be income taxable

50000
18000
15000
3000

Answer 16

3000
Difference between premiums paid and cash value would be taxable

Question 17

Which is true re taxation of accelerated benefits under life ins policy

Always taxed
10% penalty for early distribution of death benefit
Tax free to terminally ill insured

Answer 17

They are tax free to terminally ill insured

Question 18

Not true re policy loans

Borrowed from cash value is taxable

Policy loans can be repaid at death
Insurer can charge interest on outstanding policy loans

Answer 18

Money borrowed from cash value is taxable

Question 19

Diagnosed with Alzheimer’s disease
Insured under life ins policy with accelerated benefits rider
Which of following is true re taxation

Entire benefit will be recd tax free
Entire living benefit is considered taxable income
Portion of benefit up to a limit is tax free rest is taxable income

Answer 19

Portion of benefit is free rest is taxable income

Question 20

If 100000 of life ins proceeds were used in settlement option which paid 13000 for ten years which would be taxable annually

13000
10000
3000

Answer 20

3000

Question 21

Immediate annuity purchased with face amount at death or cash value at surrender

Non taxable
Nonforfeiture
Settlement option

Answer 21

Settlement option

Question 22

Life ins death proceeds are

Taxed as capital gain
Taxed as ordinary income
Generally not taxed as income

Answer 22

Generally not taxed as income

Question 23

Premiums paid by Emp in business life ins policy are

Tax deductible by Emp
Always taxable to employee
Never taxable to employee

Answer 23

Tax deductible by employer

Question 24

Which would premium be tax deductible

Paid by individual on own life ins
Paid by mother on her sons policy
Paid by Emp on 30000 group term life ins plan for emps

Answer 24

Paid on 30000group term life ins plan for emps