QuestionAugust 6, 2025

Which of these describes the result of a modified endowment contract that failed to meet the seven-pay test? A. Withdrawals will be prohibited B. The premium payments will be tax deductible C. Policy loans are disallowed D. Pre-death distributions are typically taxable

Which of these describes the result of a modified endowment contract that failed to meet the seven-pay test? A. Withdrawals will be prohibited B. The premium payments will be tax deductible C. Policy loans are disallowed D. Pre-death distributions are typically taxable
Which of these describes the result of a modified endowment contract that failed to meet the seven-pay test?
A. Withdrawals will be prohibited
B. The premium payments will be tax deductible
C. Policy loans are disallowed
D. Pre-death distributions are typically taxable

Solution
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Answer

D. Pre-death distributions are typically taxable Explanation 1. Identify the consequence of failing the seven-pay test A modified endowment contract (MEC) that fails the seven-pay test results in pre-death distributions being taxable.

Explanation

1. Identify the consequence of failing the seven-pay test<br /> A modified endowment contract (MEC) that fails the seven-pay test results in pre-death distributions being taxable.
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