Question

which distribution(s) from a modified endowment contract would be taxable as income at the time received to the extent that the cash value of the contract immediately before the payment exceeds the investment in the contract? a. both partial cash surrender and policy loan b. neither partial cash surrender nor policy loan c. partial cash surrender d. policy loan

Explanation:

In a Modified Endowment Contract, a partial cash - surrender is taxable as income to the extent that the cash value of the contract immediately before the payment exceeds the investment in the contract. A policy loan is not taxable income in such a situation.

Answer:

C. Partial cash surrender