SIE practice questionhardVariable Annuities
Which of the following statements regarding tax treatment of variable annuity earnings is correct?
- AWithdrawals are always tax-free.
- BEarnings are taxed annually regardless of withdrawal.
- CEarnings are tax-deferred until withdrawal.✓ Correct answer
- DEarnings are subject to capital gains treatment at distribution.
Explanation
Why C — Earnings are tax-deferred until withdrawal.
Earnings tax are deferred until withdrawn, at which point they are taxed as ordinary income, not capital gains. They are not taxed annually nor always tax-free.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Investment Companies & Packaged Products questions
- If an investor fails to fulfill an LOI, what happens to the previously reduced sales charges?
- A primary risk associated with private equity investing is:
- Which risk is unique to investors in closed-end funds, compared to open-end mutual funds?
- Which regulatory feature applies to most hedge funds?
- Which tax characteristic is a major advantage of ETFs over mutual funds?
- A withdrawal from a 529 college savings plan used for non-qualified expenses will result in:
- An investor buys shares of an open-end mutual fund at the public offering price (POP). What does the POP generally…
- Which of the following best explains why ETFs experience lower capital gains distributions than mutual funds?