Question

18. Which of the following correctly describes the basic income tax treatment of nonqualified annuities? a. Contract principal is not subject to taxation; interest earnings are subject to taxation. b. Contract principal is subject to taxation; interest earnings are not subject to taxation. c. Neither contract principal nor interest earnings are subject to taxation. d. Both contract principal and interest earnings are subject to taxation. 19. The exchange of one annuity contract for another is a tax-free transaction under the rules of: a. IRC Section 72(t) b. FINRA Rule 2330 c. IRS Revenue Ruling 2003-51 d. IRC Section 1035 20. Lorraine invested $50,000 in a nonqualified deferred annuity at the age of 50. Three years later, the contract has grown to $64,000, and Lorraine takes a $5,000 withdrawal. The contract is still in its accumulation stage. Which of the following statements is true? a. The withdrawal is fully taxable. b. The withdrawal is not taxable. c. $4,000 of the withdrawal is taxable; $1,000 is tax free. d. $1,000 of the withdrawal is taxable; $4,000 is tax free.

          18. Which of the following correctly describes the basic income tax treatment of nonqualified
annuities?
a. Contract principal is not subject to taxation; interest earnings are subject to taxation.
b. Contract principal is subject to taxation; interest earnings are not subject to taxation.
c. Neither contract principal nor interest earnings are subject to taxation.
d. Both contract principal and interest earnings are subject to taxation.
19. The exchange of one annuity contract for another is a tax-free transaction under the rules of:
a. IRC Section 72(t)
b. FINRA Rule 2330
c. IRS Revenue Ruling 2003-51
d. IRC Section 1035
20. Lorraine invested $50,000 in a nonqualified deferred annuity at the age of 50. Three years
later, the contract has grown to $64,000, and Lorraine takes a $5,000 withdrawal. The contract is
still in its accumulation stage. Which of the following statements is true?
a. The withdrawal is fully taxable.
b. The withdrawal is not taxable.
c. $4,000 of the withdrawal is taxable; $1,000 is tax free.
d. $1,000 of the withdrawal is taxable; $4,000 is tax free.

18. Which of the following correctly describes the basic income tax treatment of nonqualified
annuities?
a. Contract principal is not subject to taxation; interest earnings are subject to taxation.
b. Contract principal is subject to taxation; interest earnings are not subject to taxation.
c. Neither contract principal nor interest earnings are subject to taxation.
d. Both contract principal and interest earnings are subject to taxation.
19. The exchange of one annuity contract for another is a tax-free transaction under the rules of:
a. IRC Section 72(t)
b. FINRA Rule 2330
c. IRS Revenue Ruling 2003-51
d. IRC Section 1035
20. Lorraine invested 50,000 in a nonqualified deferred annuity at the age of 50. Three years
later, the contract has grown to64,000, and Lorraine takes a 5,000 withdrawal. The contract is
still in its accumulation stage. Which of the following statements is true?
a. The withdrawal is fully taxable.
b. The withdrawal is not taxable.
c.4,000 of the withdrawal is taxable; 1,000 is tax free.
d.1,000 of the withdrawal is taxable; 4,000 is tax free.

Added by Susan L.

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