All of the following are false regarding the taxation of nonqualified annuities, EXCEPT:

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All of the following are false regarding the taxation of nonqualified annuities, EXCEPT:

a. Premiums are made with taxed dollars; however, interest is tax-deferred.

b. Premiums are made with pre-tax dollars; however, interest is taxed in the year earned.

c. Premiums are taxable and interest is taxable in the year it is earned.

d. Premiums are paid with pre-tax dollars and interest is tax-deferred.

Answer: a. Premiums are made with taxed dollars; however, interest is tax-deferred.

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