CLU (Chartered Life Underwriter) Exam

How are withdrawals from a nonqualified deferred annuity taxed prior to annuitization?

First-in, first-out (FIFO) — cost basis withdrawn first, then gain Last-in, first-out (LIFO) — gain withdrawn first, then cost basis Ratably between gain and basis on each withdrawal Always as return of capital only

Correct Answer:

Last-in, first-out (LIFO) — gain withdrawn first, then cost basis

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