Packaged products

Question 1

How much of a mutual funds net investment income must it distribute to investors if it wishes to avoid paying any taxes?

Answer 1

100% net investment income

Although min is 90%, if it doesn’t want to pay any taxes, must pay 100% NII so there’s no taxable income remaining

Question 2

client purchased a variable life insurance policy with a death benefit of $450,000. The November 2019 statement showed a cash value of $28,000. If the client wanted to borrow as much as possible, the insurance company would have to allow a loan of at least ____

Answer 2

$21,000

Once a variable life policy is in force for a minimum of three years (this one is a bit longer than that), there is a requirement to make the loan provision available. At the three-year mark, that minimum becomes 75% of the computed cash value.