Loans that are taken from a modified endowment contract are considered to be __________ for tax purposes.

Question

Quizplus · Accepted Answer

Loans from a modified endowment contract are considered to be distributions for tax purposes. Therefore, a loan from a modified endowment contract under which there is a gain in the policy contract will result in taxable income to the policy holder that is equal to the lesser of the loan and the amount of the gain.

Loans That Are Taken from a Modified Endowment Contract Are