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  4. Federal Tax Considerations

Free Federal Tax Considerations Practice Questions

Ohio Life exam — 25 practice questions.

Subtopics: Death benefit tax, Cash value growth, MEC, Annuity taxation, 1035 exchange, 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

Read the Federal Tax Considerations study guide

Sample questions & answers

1. Generally a life insurance death benefit paid in a lump sum to a named beneficiary is:

Received free of federal income tax

Lump-sum death benefits are generally income-tax-free to the beneficiary.

2. Cash value growth inside a permanent life policy is generally:

Tax-deferred while it remains in the policy

Inside cash value buildup grows tax-deferred.

3. A life policy that is overfunded beyond federal limits becomes a:

Modified endowment contract (MEC)

Overfunding past the 7-pay test creates a MEC, changing distribution taxation.

4. Earnings withdrawn from a nonqualified deferred annuity are taxed as:

Ordinary income, gains first (LIFO)

Nonqualified annuity withdrawals are taxed gains-first as ordinary income.

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Practice: Federal Tax Considerations

Take a randomized, timed-style practice test. Answer choices are shuffled and your results are scored instantly with an explanation for every question.

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.