SIE Exam Question 310: Answer and Explanation

Question: 310

During the accumulation phase of a variable annuity, dividends, interest, and capital gains

• A. may be reinvested without any current tax liability.
• B. may be withdrawn with no tax implications.
• C. are taxed as capital gains if the contract is non-qualified.
• D. are taxed as ordinary income if the contract is non-qualified.

Correct Answer: A

Explanation:

A - One of the most attractive benefits of a variable annuity is tax-deferred growth during the accumulation period. All dividends, interest, and capital gains earned during the accumulation period may be reinvested tax-free.