Cannon Certified Trust and Fiduciary Advisor (CTFA) Practice Test

These questions are part of the practice quiz. Start practicing

• In calculating a decedent's gross estate, a life insurance policy that the decedent owned with beneficiaries named as children is included to the extent of the decedent's ownership rights (incidents of ownership).
• In a GRAT scenario, the portion of the trust included in the grantor's estate is determined by which rate?
• On which tax return is the alternate valuation date elected?
• A pooled income fund should NOT invest in which of the following?
• Which statement about a general power of appointment and tax consequences is accurate?
• Setting the investment objectives for a customer does NOT include:**
• Which term describes preferred stock that can be converted into common stock?
• In the early stages of a business recession investment managers usually buy:
• Which of the following is least likely to be used as a determinant in the acceptance or declining of a new account?
• If interest rates are expected to decline, which treasury bond would offer the greatest potential for price appreciation?
• What term describes the date on which a bond repays its face value to the holder?
• What is the best definition of a constructive trust?
• Which of the following is NOT an element of total return to the participant in a profit sharing retirement plan?
• What is a primary reason to invest internationally?
• Which of the following is NOT an accepted method of creating a QDOT?
• What is the method to determine the price-to-earnings ratio for a stock?
• Which statement best describes a contingent remainder in a life estate context?
• Which statement about a QTIP trust is false?
• Which type of bond is generally exempt from federal income tax?
• A life estate could be accompanied by which of the following?
• Which statement about alternate valuation of a decedent's estate is true?
• An example of a defensive stock is a:
• An inverted yield curve implies that which of the following is true about long-term rates versus short-term rates?
• Which retirement plan is an example of a Defined Contribution plan?
• Which of the following statements about general powers of appointment is true?
• In portfolio analysis, the alpha coefficient is best described as:
• Which factors will impact the value of a Charitable Remainder Unitrust's remainder at inception?
• When do stock prices tend to peak relative to a recession?
• D intends to create a trust to pay medical and educational expenses for his children, grandchildren and their descendants. D does not assign any GST exemption to the trust. Which payments will be subject to GST tax?
• In GST planning, what are the target inclusion ratio values to achieve GSTT exemption or full taxation?
• Which of the following best describes the income taxation of estates?
• A grandparent establishes an irrevocable trust with income to her child for his life and then to his children. She funds the trust with assets valued at $3,000,000 and allocates $1,000,000 of her lifetime GST exemption. The inclusion ratio for this trust is:
• Cyclical changes in the business cycle would most likely have the greatest effect on which type of company?
• Without specific language in the instrument, a trust is considered by common law to be which?
• Which of the following would be covered under a typical flood policy scenario with heavy rain causing a creek to overflow?
• Which of the following is taxable, federally?
• Which form is used to report the federal estate tax?
• Regarding distributable net income (DNI), which statement is correct?
• Which bond is secured by real estate as collateral?
• In an ESOP of a closely held business, which cost factor is commonly a concern?
• Which statement accurately indicates whether Fred can make a qualified disclaimer, and why, in the trust arrangement described?
• Stock prices are a ________ indicator.
• Investors in high marginal tax brackets are LEAST likely to be interested in which of the following?
• For jointly owned property between a decedent and a spouse with right of survivorship, the decedent's gross estate includes the decedent's share.
• Your client has a major medical policy with an unlimited benefit. The policy also features $2,000/year deductive after which benefits are paid 80%. Due to an injury, he has surgery costs $10,000. How much will your client have to pay?
• Which of the following statements is NOT required in a QTIP trust?
• A value manager's portfolio would be expected to:
• Which statement describes a Charitable Remainder Unitrust payout?
• In the described GST scenario, which statement most accurately reflects the meaning of the inclusion ratio?
• Income in Respect of a Decedent (IRD) must be treated how for gross income tax purposes?
• The estate's initial fiduciary income tax return is determined by the estate's fiscal year as chosen by the executor. Which statement is true?
• Under kiddie tax rules, if a child has $5,000 of unearned income with $2,100 taxed at the child's rate and $2,900 taxed at the trust/estate rate, which statement is correct?
• Which expression correctly defines Inclusion Ratio?
• All of the following dates are established by the board of directors with regard to paying dividends EXCEPT:
• Declared dividends are paid to stockholders registered on the books on or before the:
• Naming a trust as the beneficiary of an IRA rollover at the owner's death can produce which result?
• Daughter receives a salary of $50,000, a year-end bonus of $1,000, a $1,000 gift, and a $1,000 dividend from her father's estate. What amount is included in Daughter's gross income?
• Which of the following is NOT required in a QTIP trust?
• What term describes the relative sensitivity of a stock's return to the market's return?
• Which date typically marks the payment date for a declared dividend?
• Communication responsibility regarding discretionary decisions?
• Which of the following best defines a caveat?
• The inclusion ratio of 67% for the described trust indicates what about GST tax treatment?
• An example of a cyclical stock is a:
• Regarding a QTIP election, which statement describes whether the entire trust amount may qualify for the estate tax marital deduction?
• Alternate valuation date is allowed on an estate tax return if which conditions are met?
• Which asset allocation MOST benefits the income beneficiary and penalizes the remaindermen?
• Which statement about the QTIP election and marital deduction is true?
• A municipal bond issue secured by the income from a bridge or toll road is called a:
• When assets are transferred to children, who is taxed on the income and at what rate?
• For the following condition indicate the Equity Management Style that the following characteristic would tend to represent on a relative basis. Financial Sector
• A 75-year-old decedent has used her entire GSTT exemption during life. A specific bequest of $10,000 is made to a family friend, age 35. Approximately how much will she receive?
• Tom Jones transfers property into an irrevocable trust, reserving the right to receive the income for life, with remainder to his son Steve after his death. Which statement best describes the gift tax implication of this transfer?
• If a grantor makes a gift of property to a trust for his children and serves as trustee, what limitation on distribution powers helps avoid adverse gift and estate tax consequences?
• A decedent passed away on September 18. Her income for the full year in which she died was $85,000, of which $60,000 had been earned and received as of September 18. How much income should be reported on the decedent's estate's initial 1041 income tax return?
• The conveyance 'O to A for life and then to B' creates which of the following sets of interests?
• Which bond type is unsecured and backed by general credit?
• Which of the following is NOT a characteristic of a qualified domestic trust (QDT)?
• A value manager's portfolio would be expected to...
• After a stock split, the number of shares each shareholder holds is:
• Which arrangements permit fiscal year election for income tax reporting?
• To avoid a penalty for underpayment of taxes, what could M do?
• A fidelity bond covers which of the following types of losses?
• The price-earnings ratio of a stock selling for $20 with earnings of $2 is:
• Which option best describes the trustee’s objective in managing personal trust assets?
• The required beginning date for a traditional IRA owner who was born August 10, 1948, is:
• A trust client creates a Charitable Remainder Unitrust that will pay 6% of the trust's annual fair market value to the donor's son for the son's life and then terminate to a qualified charity. Which of the following factors will have an impact on the value of the Charitable Remainder at trust inception? 1. The son's age 2. The donor's age 3. The IRC section 7520 interest rate for the month of trust funding 4. The timing of the payout to the son each year
• A donor funds a charitable remainder unitrust with appreciated stock; The deduction is FMV less actuarial value of retained life interest up to 30% of AGI.
• Under the conveyance 'O to A for life and then to B', who holds the life estate?
• In GST planning, what does an inclusion ratio of 0 indicate?
• Corporate bonds are securities representing corporate:
• In a Qualified Terminable Interest Property (QTIP) marital trust, the surviving spouse may be given various powers of appointment. Which may be included for the surviving spouse to have maximum control available as a beneficiary of a QTIP while retaining election options for the executor?
• Which of the following is an element of ongoing concern in an Employee Stock Ownership Plan (ESOP) of a closely held business?
• In the revocable trust example, who served as successor trustee after Franklin's death?
• Declared dividends are paid to stockholders registered on the books on or before which date?
• For the following condition indicate the Equity Management Style that the following characteristic would tend to represent on a relative basis. Price to Book ratio higher than relative to market averages
• Which of the following best defines an equity security?
• Which statement BEST describes the timing of an estate's income tax reporting period?
• Payments made directly to an educational institution for tuition on behalf of grandchildren are:
• Which option correctly assigns tax statuses for Corporate bonds, Government bonds, In-state municipal bonds, and Out-of-state municipal bonds?
• If inclusion ratio is 0.25 and tax rate is 40%, what is the applicable rate?
• Keith died in November. In December, his company paid his estate $100,000 in deferred compensation. Keith left his entire estate to his brother Michael. Which of the following tax returns will NOT be affected by this payment?
• Diversification primarily aims to reduce which type of risk?
• Regulation 9 allows which of the following?
• In a trust with a power of appointment, which option correctly identifies the type of power associated with the 5x5 power?
• In a QTIP trust, can the grantor-spouse allocate the GST exemption to the trust property?
• Which of the following is the value of the decedent's gross estate given assets: $1,400,000 in own name; $150,000 joint with spouse; $100,000 life insurance policy with the children as beneficiaries?
• Which of the following assets is ERISA NOT required to be held by the trustee in a qualified retirement plan?
• Which investment would a pooled income fund most reasonably avoid?
• Which of the following generally may NOT hold real property?
• Your client dies holding securities purchased five years ago with a cost basis of $100 and a date-of-death value of $200. The securities are sold 2 months after death for $225. Without using alternate valuation, what is the gain on the sale of the securities?
• Bonds maturing in a sequence of years are called:
• In a qualified domestic trust, at least one trustee must be a U.S. citizen or domestic corporation.
• Which statement correctly describes a skip person within a trust?
• Which statement about the Net Investment Income Tax (NIIT) is true?
• Which statement about medical expenses paid on behalf of an individual to a medical care provider is false?
• A Grantor Retained Annuity Trust lasts until death or seven years. If the grantor dies in year 6, how much of the trust's current fair market value is included in the grantor's estate?
• A terminally ill donor wishes to make gifts by check before death. Which statement best represents the guidance you should give to ensure completed gifts?
• Which statement about a QTIP election is true?
• The term 'bear market' describes the stock market:
• Which of the following accounts generally may NOT hold real property?
• With the GSTT exemption used, a $10,000 bequest to a non-family skip person yields approximately what net amount to the recipient?
• O rents a house to L. L pays annual rent of $15,000 and also pays O’s mortgage of $1,000 per month; L adds a pool improving the property by $8,000. What is O’s rental income for the year?
• If you own a 7% bond maturing in twenty years, and long-term rates go to 10%, which scenario is most likely?
• Which statement BEST describes an ESTATE as an income tax reporting entity?
• Which of the following is not a qualifying event that permits conversion of a NICRUT to a STANCRUT?
• As a portfolio manager faced with a client who wants to fully participate in bull markets, but stand on the sidelines during bear markets, you should do which of the following?
• Which statement about grantor retained annuity trusts (GRATs) is FALSE?
• The term 'listed stock' refers to any stock:
• Which of the following is included as an element of total return in a profit-sharing retirement plan?
• In indicating the investment style associated with a given standard deviation higher than the market, which style is most likely?
• For convenience, securities held in fiduciary accounts may be held at a depository instead of in the physical possession of the owner. These securities are held in which of the following types of registration?
• Which of the following items comprising a decedent's estate is NOT income in respect of a decedent?
• Which statement about alimony and child support for gross income purposes is correct?
• Which statement BEST describes the timing of an estate's income tax reporting period?
• In an irrevocable trust holding rental property, when is it permissible to rent to an employee of the trust department?
• When should a trustee communicate a discretionary transaction that will materially affect beneficiaries?
• Bank policy question: The correct action when a depositor asks to prepare a simple will?
• Which type of municipal bond is backed by the full faith and credit of the issuing municipality?
• At the death of a decedent, the decedent's will creates a trust paying all income to the surviving spouse and permits principal encroachment, at the trustee's discretion, for benefit of the surviving spouse and/or children during the surviving spouse's lifetime. Which of the following is true of this arrangement?
• Under the duty of loyalty, which action by a corporate trustee regarding shares held by the trust would NOT violate loyalty?
• Under a tenancy by entirety, if a married person’s home is valued at 350,000 at the death of one spouse, how much is included in that spouse’s gross estate?
• When the Federal Mid Term rate is 8%, what discount rate is used for determining the present value of a future interest on a GRAT?
• What does per stirpes distribution mean in the context of trusts?
• A clause which states 'an amount equal to... should be placed in trust...' is an example of which?
• A flood occurs at a house you hold in an account. It will be very expensive to repair the damage. Which of the following would be covered under a typical flood insurance policy?
• Last year, you bought a building for $800,000. The current FMV is $1,000,000. The building is insured for fire-related perils for $700,000 with an 80% coinsurance provision and a $2,000 straight deductible. Last week, a fire broke out causing $700,000 in damage. What would the insurance company pay?
• Under the conduit theory, the investment income from a regulated investment company is taxed to the investor. Which of the following is true?
• Which factor does NOT impact the value of the remainder in a Charitable Remainder Unitrust described in the scenario?
• What is the rate banks pay when they borrow money from their district Federal Reserve bank?
• Which of the following is an intangible asset?
• From decedent death on September 18, the year's income was $85,000, of which $60,000 had been earned and received as of Sept 18. How much income should be reported on the decedent's estate's initial income tax return?
• Which clause would MOST LIKELY be considered a general power of appointment?
• Under the 2017 Tax Act, what is the highest combined tax rate on an individual’s investment income?
• Under alternate valuation, which statement is true about cost basis for capital gains purposes?
• Shareholders must receive financial statements from investment companies with what frequency?
• In a QTIP arrangement, which provision is required?
• Which of the following is NOT an element of a non-qualified deferred compensation plan?
• A will provides the following funding clause about the FAMILY TRUST: the maximum dollar amount which, without considering the federal estate tax marital deduction, can pass from the settlor's gross estate free of federal estate taxation, taking into consideration credits against estate tax and taxable transfers. This is an example of which kind of funding clause?
• Which statement about general powers of appointment carry transfer tax consequences?
• If a trust provides the surviving spouse with lifetime income and remainder to charity and the executor elects QTIP, what is typically true regarding the marital deduction?
• For the following condition indicate the Equity Management Style that the following characteristic would tend to represent on a relative basis. Dividend Yield lower than the market averages
• Distributions from a charitable remainder trust to the non-charitable beneficiaries are:
• What annual review requirement applies to assets in an account?
• Which statement defines a skip person in a trust context?
• Date the bond repays its face value plus the final interest payment to the holder is called the
• When a surviving spouse purchases the remainder interest in a QTIP marital trust from the remaindermen and pays adequate consideration, which of the following is true for gift tax purposes?
• Which of the following is NOT a characteristic of tenancy-by-the-entirety ownership?
• Which statement is true about QDOT usage?
• In a Crummey trust provision, the power of appointment granted to the beneficiary is described as which type?
• Which payment formula change is acceptable for a Charitable Remainder Trust with a "Flip" provision?
• Which retirement plan is an example of a Defined Benefit plan?
• Under the conduit theory for a regulated investment company, which statement is correct?
• Convertible preferred stock is a type of preferred stock that permits the owner to convert it into common stock under set terms.
• In a zeroed-out GRAT, which outcome would prevent the grantor from receiving an estate planning benefit?
• What is the main tax effect of a QTIP election?
• Duty to inform remainder beneficiaries of a revocable trust while the settlor is alive and competent?
• In a portfolio designed for income beneficiaries, which statement is most accurate?
• Which clauses would MOST LIKELY be considered a general power of appointment?
• In property interests, which statement correctly defines a reversion?
• Diversification is best described as which?
• Life insurance proceeds tax consequences when policy ownership transferred to irrevocable trust and death occurs?
• Which is 'triple exempt'?
• Which rate is the rate banks charge each other in the interbank market, typically above the discount rate?
• In a divorce scenario, if alimony and punitive damages are involved, which amount is included in income?
• If a decedent’s estate contains an antique automobile and a director wishes to purchase it, what is the proper course of action?
• A US citizen living in Canada, died and was survived by a spouse, who is a citizen of Canada. The estate valued at $8 million after expenses, passed to the surviving spouse outright. How much of the surviving spouse's interest qualifies for the marital deduction?
• What is the correct expression for the Applicable Rate in GST planning when the tax rate is 40%?
• Which tax-related issue is commonly associated with ESOPs?
• Which statement accurately describes tenancy by the entirety?
• What term describes the government's use of taxes and spending to influence the economy?
• Which type of bond is backed by the revenue generated by a specific project rather than by the issuer's general credit?
• Which of the following is a permissible investment in an IRA or IRA rollover?
• Which security is generally considered the highest risk among the following?
• A donor establishes a charitable remainder unitrust that will pay him 6% annually. He funds it with a highly appreciated stock holding, purchased by his grandfather. His income tax charitable deduction is which of the following?
• Which policy describes actions by a central bank to influence the economy by controlling the money supply and interest rates?
• Which of the following is taxable, at the state level?
• Once a will is properly drafted, it is valid in which jurisdiction?
• All of the following are leading economic indicators EXCEPT:
• An easing of money and credit would come from which combination?
• Which form is used to report the estate's fiduciary income tax?
• Absent any relevant language in the instrument, under common law a trust is considered to be which of the following?
• For a zeroed-out GRAT, which condition must be met for it to provide an estate planning benefit?
• Debentures are backed by:
• How does the Fed conduct monetary policy?
• Which statement best describes control under a QTIP arrangement?
• Which of the following is an advantage of a QTIP trust over a life estate or general power of appointment trust?
• Which of the following is an example of tangible personal property?
• In the long-term performance of equity investments, which factor is most important?