LLQP (Life Licence Qualification Program) Practice Exam · Question
If a policyowner withdraws funds from their non-exempt life insurance policy, what amount is subject to income tax?
When money is withdrawn from a non-exempt policy, the amount received that is in excess of the policy's ACB is considered a policy gain and must be reported as
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Question: If a policyowner withdraws funds from their non-exempt life insurance policy, what amount is subject to income tax?
Answer options:
- The full amount of the withdrawal. ✅ The portion of the withdrawal that exceeds the policy's Adjusted Cost Basis (ACB).
- None, all withdrawals are tax-free.
- The withdrawal amount minus any premiums paid in the last year.
Correct answer: The portion of the withdrawal that exceeds the policy's Adjusted Cost Basis (ACB).
Explanation: When money is withdrawn from a non-exempt policy, the amount received that is in excess of the policy's ACB is considered a policy gain and must be reported as taxable income in that year.
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- A life insurance policy that offers lifelong coverage, a guaranteed death benefit, and a savings component tha
- Group benefits in Canada commonly include:
- Sarah, a 35-year-old marketing professional in Ontario, purchases a participating whole life insurance policy
- Mark, a 45-year-old business owner in British Columbia, has a Universal Life policy with a Level Cost of Insur
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