Retirement and Other Insurance Concepts
What test determines whether a life insurance contract is classified as a Modified Endowment Contract (MEC) under IRC § 7702A?
Answer and explanation
Answer: B. A policy becomes a MEC if cumulative premiums paid in the first 7 years exceed the 7-pay premium limit under IRC § 7702A.Source: IRS Publication 525 / IRC § 7702A — MEC 7-Pay Test
More retirement and other insurance concepts questions
- What type of individual policy can an employee choose when exercising a group life conversion right under TIC § 1131.108?
- When a permanent policy is surrendered for cash, how is the taxable portion of the surrender proceeds calculated?
- Which fact most clearly separates a life settlement from a viatical settlement?
- Which of these is a cash need rather than a continuing income need in a personal needs analysis?
- Who makes contributions to a Simplified Employee Pension (SEP) IRA plan, and how are they taxed?
- Why are corporate premiums paid for key-person life insurance non-deductible as business expenses for income tax purposes?
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