Federal Tax Considerations for Life Insurance and Annuities
How is the interest an individual pays on personal policy loans generally treated?
Answer and explanation
Answer: A. Interest on a policy loan taken for personal purposes falls under the disallowance of personal interest and is not deductible. It also does not increase the owner's basis, since basis is premiums paid rather than interest charged.Source: 26 U.S.C. § 72 — 26 U.S.C. § 163
More federal tax considerations for life insurance and annuities questions
- Why is a direct trustee-to-trustee transfer usually preferred to a sixty day rollover?
- Why must a section 1035 exchange be carried out between the two insurers rather than by the owner?
- Within what period must a distribution be rolled over to another qualified plan or individual retirement arrangement to avoid current tax?
- A death benefit is excluded from the beneficiary's income. Does that settle the position for estate tax as well?
- A participant takes an eligible rollover distribution as a cheque rather than by direct transfer. What follows?
- A participating policyowner in good health wants each declared dividend to increase the amount of insurance without new underwriting. Which use fits?
621 New York questions like this one.
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