This week’s study question from the Solomon Online Exam Simulator question database is now available.
Question (Relevant to the Series 6, Series 7, Series 65, and Series 66):
The IRS uses the FIFO method for taxing:
Answers:
A. Withdrawals from a life insurance contract
B. Withdrawals in excess of the basis in a variable annuity contract
C. Loans from a life insurance contract
D. None of the choices listed
Correct Answer: A. Withdrawals from a life insurance contract
Rationale: Life insurance enjoys “first in, first out“ treatment from the IRS. Annuities are taxed on a LIFO basis, and money borrowed from a life insurance contract is not taxed at all.
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