Group Life & AnnuitiesQuestion 115 of 716
What is the additional IRS penalty (on top of ordinary income tax) for taking a taxable withdrawal from a non-qualified annuity before age 59½?
a.7.5%
b.10%
c.20%
d.5%
Explanation
Internal Revenue Code §72(q) imposes a 10% additional tax on the taxable portion of a withdrawal taken from an annuity before age 59½. This penalty is added to the ordinary income tax on the gain portion of the early distribution.
Law Reference: 26 U.S.C. §72(q)This topic, taught in full in the California Life & Health Insurance Producer Exam guide. California Life & Health Insurance Producer Exam — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
Practice all 716 questions free — no signup required.
Own the complete California Life & Health Insurance Producer Exam guide — PDF + EPUB, $19.99 →
Related questions on this topic
- By definition, a single premium immediate annuity (SPIA) must begin making payouts to the annuitant no later than:
- Which annuity settlement option produces the largest periodic payment for a given premium, all else equal?
- A married couple wants lifetime income that continues to whichever spouse lives longer. Which annuity settlement option is the most common fit?
- Which of the following exchanges is NOT permitted on a tax-free basis under Internal Revenue Code Section 1035?
- Which statement about a typical annuity surrender charge schedule is correct?
- During the accumulation phase of a non-qualified deferred annuity, how is the interest credited inside the contract treated for federal income tax purposes?
Last reviewed: · editorial process
PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)