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FINRA Investment Company and Variable Contracts Products Representative Examination (IR) Sample Questions:
1. Which of the following statements regarding the taxes associated with a variable life insurance policy is
false?
A) Earnings on a variable life insurance policy grow tax-free.
B) One variable life policy can be exchanged for another variable life policy without triggering any tax
consequences under Section 1035 of the tax code.
C) If a policyholder withdraws some of the cash value associated with the policy, taxes need only be paid
on the amount that exceeds the totalamount of the premiums paid to date.
D) Payments to beneficiaries upon the death of the policyholder are taxed as ordinary income.
2. The Securities Act of 1933 did what?
A) All of the above are correct answers.
B) It established the requirement that new securities be registered.
C) It established the requirement that investment advisers be registered with the SEC.
D) It established the SEC as the regulatory agency for the secondary market.
3. Ms. Newbie, a newly-minted registered representative with Savvy Investments, just had her first client
walk through the door. Before she can do anything, Ms. Newbie must obtain which of the following pieces
of information from her client?
A) taxpayer identification number (TIN)
B) investment objectives
C) age
D) occupation
4. Tex Payor bought shares of the Stocks4U Mutual Fund on February 26th.During the year, the fund sold
some of the stocks in which it was invested, generating long-term capital gain income for the fund. Tex
received a distribution of some of these gains at the end of the year, based on his proportionate
ownership of the fund. Which of the following statements is true regarding the tax consequences of this
distribution to Tex?
A) Tex will have to pay tax on the distribution at the tax rate for long-term capital gains, which are currently
taxed preferentially.
B) There are no tax consequences to Tex. Mutual fund investors are taxed only on dividend distributions
and on capital gains realized when they sell shares of a fund that they own. Capital gains earned by the
fund when securities are bought and sold by the fund's manager are taxed to the fund.
C) Tex will have to pay tax on the distribution unless he opts to reinvest the distribution in the fund, in
which case the income will not be taxable.
D) Tex will have to pay tax on the distribution at his marginal tax rate. Since Tex had not been invested in
the fund for over 12 months when the distribution occurred, it is considered to be short-term capital gain
income for him, which is taxed as ordinary income.
5. A discretionary account authorization permits a registered representative to decide:
A) how much of an asset to buy or sell for the account.
B) what specific asset to purchase or sell.
C) whether to make a purchase or a sale.
D) all of the above.
Solutions:
| Question # 1 Answer: D | Question # 2 Answer: B | Question # 3 Answer: C | Question # 4 Answer: A | Question # 5 Answer: D |



