Group Life & AnnuitiesQuestion 698 of 716
A withdrawal of taxable gain from a nonqualified annuity before age 59 1/2 is generally subject to:
a.A 25% federal penalty
b.No penalty at all, because annuity withdrawals of any kind are treated as tax-favored
c.A 10% federal tax penalty in addition to ordinary income tax
d.Long-term capital gains tax only
Explanation
Early distributions of gain from an annuity before 59 1/2 usually incur a 10% federal penalty on top of ordinary income tax. Annuity gains are ordinary income, not capital gains.
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Related questions on this topic
- Once an annuitant has lived long enough to recover the entire cost basis through the exclusion ratio, subsequent payments are:
- A surrender charge on a deferred annuity:
- Many deferred annuities include a free withdrawal provision allowing the owner to withdraw, without a surrender charge, up to:
- When determining the suitability of an annuity recommendation, a producer should consider the client's:
- Recommending a deferred annuity with a long surrender period to an elderly client who needs access to funds soon is a suitability concern because:
- In a QUALIFIED annuity funded entirely with pre-tax dollars, distributions are:
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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)