Finra Exam Series-6 Topic 7 Question 65 Discussion

Actual exam question for Finra's Series-6 exam

Question #: 65
Topic #: 7

Which of the following statements regarding the tax treatment of variable annuity contracts is false?

AEarnings on the contributions to a variable annuity are not taxed during the accumulation phase.

BIf an investor opts to make a random, partial, lump sum withdrawal, the entire amount of the withdrawal will be taxed as ordinary income to the investor.

CIf an investor opts to receive regular payments of a specific amount -i.e., annuities-part of each payment will be considered repayment of principal and will not be subject to taxation.

DAn investor who makes a withdrawal prior to having reached the age of 62 will be subject to a 10% penalty on the withdrawal.

Show Suggested Answer

Suggested Answer: D

Only the 16-year-old entrepreneur is not permitted to open an investment account. As a minor, he is not a legal person. All the other selections are legal persons and can establish investment accounts.

by Annelle at Oct 05, 2023, 06:08 PM

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Hollis

1 months ago

As a tax accountant, I can confirm that option D is the correct answer. The 10% penalty only applies to qualified retirement plans, not variable annuities.

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Gwenn

1 months ago

Option A is clearly the false statement. Earnings on variable annuities are definitely taxed during the accumulation phase, just not when the money is withdrawn.

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Blondell

1 months ago

Haha, the IRS always finds a way to get their hands on our money, don't they? This question is making my head spin!

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Jame

2 months ago

This is tricky, but I believe the answer is D. A 10% penalty for withdrawals before age 62 sounds like the false statement here.

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Buddy

3 days ago

C) If an investor opts to receive regular payments of a specific amount -i.e., annuities-part of each payment will be considered repayment of principal and will not be subject to taxation.

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Katina

6 days ago

B) If an investor opts to make a random, partial, lump sum withdrawal, the entire amount of the withdrawal will be taxed as ordinary income to the investor.

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Maryanne

1 months ago

A) Earnings on the contributions to a variable annuity are not taxed during the accumulation phase.

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2 months ago

I think the false statement is option A.

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