1. Exam Prep
  2. Vermont
  3. Life, Accident & Health
  4. Federal Tax Considerations

Free Federal Tax Considerations Practice Questions

Vermont Life, Accident & Health exam — 31 practice questions.

Subtopics: Transfer for value, Estate inclusion, MEC distributions, Qualified plan contributions, Employer-paid disability benefits, Required provisions, Reinstatement, Notice of claim, Claim forms, Proof of loss, Time of payment of claims, Payment of claims, Physical exam and autopsy, Legal actions, Change of beneficiary, Entire contract, Time limit on certain defenses, Optional provisions, Grace period, Guaranteed renewable, Noncancelable, Optionally renewable, Conditionally renewable, Pre-existing condition, Free-look provision, Insuring clause, Change of occupation, Misstatement of age, Relation of earnings to insurance, Intoxicants and narcotics, Coordination of benefits

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

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.