Taxation Practice Questions
44 free taxation questions for the California Life & Health insurance license exam. Pick any question — answer it and get the full 3-part explanation, no signup required.
- 1.To keep life insurance proceeds out of the insured's gross estate for federal estate tax purposes, the insu…Difficulty 2/5
- 2.A 62-year-old policyowner takes a taxable distribution from a policy that has become a MEC. Which statement…Difficulty 2/5
- 3.Premiums an individual pays on a personally owned life insurance policy are, for federal income tax purposes:Difficulty 1/5
- 4.An owner takes a loan against the cash value of a policy that has become a Modified Endowment Contract (MEC…Difficulty 2/5
- 5.Under IRC §79, employer-paid group term life insurance coverage up to what face amount is generally not inc…Difficulty 1/5
- 6.An insured dies while owning a policy that was classified as a Modified Endowment Contract. The death benef…Difficulty 2/5
- 7.Dividends paid on a participating life insurance policy are, for federal income tax purposes:Difficulty 1/5
- 8.For federal estate tax purposes, life insurance proceeds are included in the insured's gross estate when th…Difficulty 2/5
- 9.Under federal income tax law, a life insurance death benefit paid in a single lump sum to a named beneficia…Difficulty 1/5
- 10.When a policyowner borrows money from the cash value of a non-MEC life insurance policy through a policy lo…Difficulty 1/5
- 11.A non-MEC policy with $25,000 of cash value and a cost basis of $10,000 lapses while an outstanding policy …Difficulty 3/5
- 12.For a non-MEC life insurance policy, a partial withdrawal of cash value is taxable to the policyowner:Difficulty 2/5
- 13.A policyowner has a cost basis of $50,000 in a non-MEC life insurance policy. The policyowner takes a parti…Difficulty 2/5
- 14.Which statement correctly compares how a partial withdrawal from a non-MEC life insurance policy is taxed v…Difficulty 3/5
- 15.A policyowner chooses to leave dividends on deposit with the insurer under the accumulation option. Which s…Difficulty 2/5
- 16.Distributions from a qualified annuity (for example, one funded through a qualified retirement plan with pr…Difficulty 2/5
- 17.A policyowner has a cost basis of $100,000 in a policy that has become a MEC and takes a $30,000 distributi…Difficulty 3/5
- 18.An employer provides an employee with $120,000 of group term life insurance and pays the full premium. For …Difficulty 2/5
- 19.A business buys a life insurance policy on a key employee, owns the policy, and is the beneficiary. Under I…Difficulty 2/5
- 20.An employer pays premiums on a life insurance policy owned by the employee, with the employee designating t…Difficulty 2/5
- 21.Under the transfer-for-value rule in IRC §101(a)(2), when a life insurance policy is sold or transferred fo…Difficulty 3/5
- 22.The 10% penalty on distributions from a Modified Endowment Contract before age 59½ does NOT apply to:Difficulty 2/5
- 23.The growth in the cash value of a permanent life insurance policy, including interest credited each year, i…Difficulty 1/5
- 24.Under an interest-only settlement option, the insurer holds the death proceeds and pays the beneficiary per…Difficulty 2/5
- 25.An insured paid total premiums of $30,000 on a life insurance policy. At the insured's death, the beneficia…Difficulty 2/5
- 26.A whole life policy matures as an endowment while the insured is still living, and the insurer pays the fac…Difficulty 2/5
- 27.Under the transfer-for-value rule, which transfer of a life insurance policy does NOT trigger the loss of t…Difficulty 2/5
- 28.When a policyowner surrenders a life insurance policy for its cash surrender value, the amount subject to f…Difficulty 1/5
- 29.A client pays $100,000 into a nonqualified annuity and elects a lifetime payment option with total expected…Difficulty 2/5
- 30.A business owns a key-person life insurance policy on a vital employee and receives the $500,000 death bene…Difficulty 2/5
- 31.A policyowner paid total premiums of $40,000 into a life insurance policy and surrenders it for a cash valu…Difficulty 2/5
- 32.Under IRC Section 101, the death benefit paid under a life insurance policy in a lump sum to a named benefi…Difficulty 1/5
- 33.Under IRC Section 79, an employer may provide group term life insurance to employees, and the premiums for …Difficulty 3/5
- 34.A policyowner surrenders a whole life policy and receives the cash surrender value. Under IRC Section 72, t…Difficulty 2/5
- 35.Under IRC §101(a), the death benefit paid under a life insurance policy to a named beneficiary is generally:Difficulty 1/5
- 36.An employer pays the premiums on group term life insurance for its employees. Under IRC §79, the cost of ho…Difficulty 2/5
- 37.Which of the following exchanges is permitted tax-free under IRC §1035?Difficulty 2/5
- 38.A life insurance policy fails the seven-pay test and becomes a modified endowment contract (MEC). What happ…Difficulty 3/5
- 39.A life insurance policy is classified as a Modified Endowment Contract (MEC) when:Difficulty 3/5
- 40.Under IRC Section 1035, which exchange of contracts is generally tax-free?Difficulty 3/5
- 41.A life insurance beneficiary receives a death benefit as a lump sum. For federal income tax purposes, this …Difficulty 1/5
- 42.An employer pays the entire premium for $80,000 of group term life insurance on an employee. How is the cov…Difficulty 3/5
- 43.A policyowner takes a cash withdrawal from a non-MEC life insurance policy that exceeds the total premiums …Difficulty 3/5
- 44.A life insurance policy fails the seven-pay test under IRC Section 7702 and becomes a modified endowment co…Difficulty 3/5