Free Federal Tax Considerations Practice Questions
Wisconsin Life exam (series 22-01) — 79 practice questions.
Subtopics: Death benefit taxation, Cash value growth, Annuity taxation, MEC, 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, Policy loan taxation, Surrender gain, Surrender calculation, Lapse with loan, Dividend interest taxation, Estate inclusion transfer, ILIT, Gift tax exclusion 2026, Estate tax exemption 2026, Marital deduction, MEC 7-pay test, MEC death benefit, MEC loans, MEC permanence, Annuity withdrawal exception, Annuity basis recovery, 1035 annuity to life, 1035 same insured, Traditional IRA limit 2026, IRA catch-up 2026, 401k deferral 2026, Super catch-up, IRA contribution earned income, IRA age limit, IRA deductibility, IRA early withdrawal, IRA penalty exceptions, Roth qualified distribution, Roth RMDs, Roth contributions basis, Indirect rollover, One rollover per year, Mandatory withholding, Inherited IRA 10-year rule, RMD failure penalty, RMD age born 1960, ERISA, Qualified plan requirements, Vesting, DC vesting schedules, Defined benefit plan, Defined contribution plan, Profit-sharing plan, SIMPLE plan eligibility, SIMPLE early withdrawal, SEP contributions, Keogh plan, 457 plan, Qualified plan loans, Employer-owned life insurance, Buy-sell premiums, Group term over 50k, Group premium deduction, Transfer for value exceptions, Life settlement taxation
Read the Federal Tax Considerations study guide
Sample questions & answers
1. Life insurance death benefits paid in a lump sum to a named beneficiary are generally:
Received income-tax-free
Lump-sum life insurance death proceeds are generally received free of federal income tax by the beneficiary.
2. The cash value growth inside a permanent life insurance policy is generally:
Tax-deferred while it remains in the policy
Cash value growth is not taxed annually; on surrender only proceeds exceeding the policy's cost (premiums paid) are included in income.
3. When annuity payments are received, the portion representing earnings is generally:
Taxable as ordinary income
The earnings portion of annuity income is taxed as ordinary income, while the return of principal is not taxed.
4. A life insurance policy classified as a modified endowment contract (MEC) loses:
Favorable tax treatment of loans and withdrawals
A MEC results when premiums exceed federal limits, causing distributions to be taxed less favorably (gain first, with possible penalty).
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.
