Discuss Finra Series-6 Exam Topic 7 Question 65

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.

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.

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33 comments · newest first

Freida 10 months ago

D seems harsh, but I guess it's the rule.

Idella 11 months ago

Wait, I thought all withdrawals were taxed?

Lenora 11 months ago

A is true, earnings aren't taxed during accumulation.

Antonette 11 months ago

Totally agree, that's how it works!

Marshall 11 months ago

B is misleading, only the earnings portion gets taxed.

Maira 11 months ago

I'm a little lost on the details of variable annuity taxation. Maybe I should skip this one and come back to it later.

Noble 12 months ago

Variable annuities can be tricky, but I'm confident I can figure this out if I just focus and read the options closely.

Lelia 12 months ago

Okay, let me think this through step-by-step. I need to identify which statement is false regarding the tax treatment.

Nana 1 year ago

Hmm, I'm a bit unsure about the tax treatment of variable annuities. I'll need to review my notes carefully.

Avery 1 year ago

This question seems straightforward, I think I can handle it.

Arlyne 1 year ago

I recall that the 10% penalty applies to early withdrawals, so option D seems accurate to me.

Alica 1 year ago

I practiced a similar question where we discussed how regular payments from an annuity are partly principal. I think option C is correct.

Kassandra 1 year ago

I'm a bit unsure about option B. I thought only the earnings portion of a withdrawal gets taxed, not the entire amount.

Bettye 1 year ago

I remember studying that earnings in the accumulation phase of a variable annuity aren't taxed, so I think option A is true.

Troy 1 year ago

Hmm, I'm not too familiar with the NetApp Deployment Engine requirements. I'll need to think this through and consider the different options before making a decision.

Yuonne 1 year ago

I think option C is the way to go. We should first check with the team to see if they all agree there's an issue with the current workflow before sending someone to training. That way, we can make a more informed decision.

Hollis 1 year 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.

Gwenn 1 year 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.

Blondell 1 year 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!

Lai 1 year ago

↳ replying to Blondell

Alyce: Definitely, gotta be careful with those withdrawals.

Alyce 1 year ago

↳ replying to Blondell

User 2: I know, it's like they want a piece of everything.

Nada 1 year ago

↳ replying to Blondell

User 1: Yeah, the tax rules can be tricky.

Jame 2 years 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.

Buddy 1 year ago

↳ replying to Jame

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.

Katina 1 year ago

↳ replying to Jame

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.

Maryanne 1 year ago

↳ replying to Jame

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

Melita 2 years ago

Option B seems incorrect to me. I thought partial withdrawals were taxed based on the proportion of contributions and earnings, not the entire withdrawal.

Jerilyn 1 year ago

↳ replying to Melita

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.

Margurite 1 year ago

↳ replying to Melita

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.

Brunilda 2 years ago

↳ replying to Melita

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

Kattie 2 years ago

Why do you think that?

Annamaria 2 years ago

I disagree, I believe the false statement is option D.

Kattie 2 years ago

I think the false statement is option A.

Finra Series-6 Exam - Topic 7 Question 65 Discussion