RFC Insurance, Risk Management & Taxation 2

Question 1

A client owns a life insurance policy with a $500,000 death benefit and has named their estate as beneficiary. Which of the following is true regarding federal estate taxes?

Accepted Answer

The death benefit is included in the gross estate if the insured held incidents of ownership

Answer

If the insured held incidents of ownership (such as the right to change beneficiaries or borrow against the policy), the death benefit is included in the gross estate.

Question 2

Which type of annuity rider guarantees that a surviving spouse will continue to receive income payments for their lifetime after the annuitant dies?

Accepted Answer

Joint and survivor rider

Answer

A joint and survivor rider ensures that annuity payments continue to the surviving spouse for their lifetime after the primary annuitant's death.

Question 3

Under the wash sale rule, which of the following transactions would disallow a capital loss deduction?

Accepted Answer

Selling stock at a loss and buying a call option on the same stock 20 days later

Answer

The wash sale rule disallows a loss if substantially identical securities (including options) are acquired within 30 days before or after the sale at a loss.

Question 4

A business owner wants to protect against the financial loss resulting from the death of a key employee. Which risk management strategy is most appropriate?

Accepted Answer

Key person life insurance

Answer

Key person life insurance is purchased by the business on the life of a critical employee, with the business as owner and beneficiary, to offset financial losses from that employee's death.

Question 5

Which of the following best describes the alternative minimum tax (AMT) for individuals?

Accepted Answer

A parallel tax system that adds back certain preference items to ensure minimum tax liability

Answer

The AMT is a parallel tax computation that adds back certain tax preference items and adjustments, ensuring taxpayers pay at least a minimum level of tax.

(RFC) Registered Financial Consultant Practice Test

(RFC) Registered Financial Consultant Practice Test

RFC Insurance, Risk Management & Taxation 2