1|Page
FP 512 EXAM TEST BANK NEWEST ACTUAL EXAM
2024-2025 WITH 300 UPDATED QUESTIONS AND
ANSWERS (VERIFIED ANSWERS) [ALREADY GRADED
A+]
During 2021, Vic's mother Rose passed away. At that time, Vic discovered
that she had a nonqualified variable annuity consisting of an initial
investment of $50,000 made in 2001. The current value of the annuity is
$126,000, and Vic is the sole primary beneficiary. If Vic chooses to take the
entire $126,000 in a lump-sum distribution to help refinance the Brewsters'
mortgage, what would be the tax consequence?
A)
$76,000 ordinary income plus a 10% penalty
B)
$76,000 long-term capital gain
C)
$126,000 ordinary income
D)
$76,000 ordinary income - The answer is $76,000 ordinary income.
,2|Page
Any payments, including death distributions, from a nonqualified
annuity are taxed as ordinary income excluding the basis of the
contract. The 10% penalty would not be applicable because the
distribution was made as a result of a death.
Vic and Tiffany Brewster Case Study
Select the statement(s) that accurately describe(s) the Brewsters' current
risk management plan.
They have inadequate life insurance.
The Brewsters' home would be covered for smoke damage.
If Vic becomes disabled, he will be taxed on his monthly benefit.
The Brewsters' home would not be covered for damage due to windstorms
and hail.
A)
II only
B)
I, III, and IV
C)
I and II
D)
,3|Page
I, II, and IV –
The amount of life insurance Vic currently has is inadequate. Vic is
the sole income provider for his wife and children along with being
responsible for a home mortgage. At the very minimum, he would
need enough life insurance to cover the mortgage. Tiffany currently
does not have any life insurance. Vic's disability income monthly
benefit would be received income tax free. The Brewsters have an
HO3 homeowners insurance policy, which covers the perils of smoke,
and windstorms and hail.
Vic and Tiffany Brewster Case Study
Krista, Tiffany's friend, visits the Brewsters. As she is sitting at the dinner
table, her chair collapses and results in her foot being broken. Choose the
part(s) of the Brewsters' homeowners insurance policy that would cover
Krista's broken foot.
Coverage F: Medical Payments to Others
Coverage E: Personal Liability
A)
I only
B)
Neither I nor II
C)
, 4|Page
II only
D)
Both I and II -
The answer is both I and II. Coverage E protects the insured
homeowner and all resident family members against liability for
bodily injury and property damage that may occur on the premise.
Coverage F pays necessary medical expenses of others that result
from bodily injury arising out of the insured's activities, premises, or
animals. Generally, Coverage F will pay up to $1,000 per person per
occurrence. Coverage F will automatically pay regardless of fault.
Coverage E only pays when the insured is at fault. In this case, the
broken chair puts the insured at fault, and Krista may seek to be
reimbursed for pain and suffering, lost wages, and medical bills.
Vic and Tiffany Brewster Case Study
Vic's son Andrew had an unexpected injury resulting in a $2,500 hospital
bill. Calculate the amount of the bill Vic's medical plan will cover.
A)
$1,600
B)
$2,300
C)
