State Insurance Licensing Exam (ExamFX Prep)

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An individual purchases a non-qualified deferred annuity. During the accumulation period, what is the tax treatment of the growth within the contract?

The growth is taxed annually as ordinary income. The growth is tax-deferred until withdrawal. The growth is taxed annually at the capital gains rate. The growth is completely tax-free.

Correct Answer:

The growth is tax-deferred until withdrawal.

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