Tax TreatmentQuestion 222 of 315
What test determines whether a permanent life insurance policy is classified as a Modified Endowment Contract (MEC)?
a.The corridor test
b.The cash value accumulation test
c.The seven-pay test
d.The guideline premium test
Explanation
Under IRC §7702A, a contract becomes a MEC if cumulative premiums paid in any of the first seven contract years exceed the seven-pay premium limit. The corridor and CVAT/GPT tests instead determine whether a contract qualifies as life insurance under §7702.
Law Reference: IRC §7702APractice all 315 questions free — no signup required.
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