All of the following statements regarding a Modified Endowment Contract are correct, EXCEPT:

All of the following statements regarding a Modified Endowment Contract are correct, EXCEPT:



a. Distributions received from a MEC are subject to a LIFO tax treatment

b. Distributions on gains withdrawn from a MEC prior to age 59 1/2 are subject to a 10% penalty in addition to taxation

c. A policy that fails the 7-pay test will be deemed a MEC

d. If a policy is deemed a MEC, the owner has 7 years to receive a refund of excess premiums and remove the MEC status



Answer: A

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