Your client, age 56, overruns their cash value life insurance policy, causing it to become a modified endowment contract (MEC). They are in need of cash as a result of a recent qualified disability. All of these statements are true, except

A) the MEC will be taxed on a last-in-last-out (LIFO) basis.

B) the client may utilize a loan from the cash value account and will avoid ordinary income tax plus the 10% early withdrawal penalty because of their

C) the death benefits of the policy will maintain their tax-free status despite now being a MEC.

D) your client may withdraw funds from the cash value account and will pay ordinary income tax on the growth portion of the withdrawal, but no 10% early withdrawal penalty.