Cannon Certified Trust and Fiduciary Advisor (CTFA) Practice Test

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• 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?
• Which clauses would MOST LIKELY be considered a general power of appointment?
• Which statement about the Net Investment Income Tax (NIIT) is true?
• 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:
• In the described GST scenario, which statement most accurately reflects the meaning of the inclusion ratio?
• Which of the following is an element of ongoing concern in an Employee Stock Ownership Plan (ESOP) of a closely held business?
• Which statement about a QTIP election is true?
• Regarding a QTIP election, which statement describes whether the entire trust amount may qualify for the estate tax marital deduction?
• The price-earnings ratio of a stock selling for $20 with earnings of $2 is:
• 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?
• In a qualified domestic trust, at least one trustee must be a U.S. citizen or domestic corporation.
• Bonds maturing in a sequence of years are called:
• Which of the following generally may NOT hold real property?
• Which of the following is least likely to be used as a determinant in the acceptance or declining of a new account?
• Which date typically marks the payment date for a declared dividend?
• Which of the following is included as an element of total return in a profit-sharing retirement plan?
• 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?
• For a zeroed-out GRAT, which condition must be met for it to provide an estate planning benefit?
• In the long-term performance of equity investments, which factor is most important?
• Which of the following statements about general powers of appointment is true?
• 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?
• Which security is generally considered the highest risk among the following?
• Which option best describes the trustee’s objective in managing personal trust assets?
• 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?
• A municipal bond issue secured by the income from a bridge or toll road is called a:
• After a stock split, the number of shares each shareholder holds is:
• An example of a cyclical stock is a:
• In a QTIP trust, can the grantor-spouse allocate the GST exemption to the trust property?
• Which of the following statements is NOT required in a QTIP trust?
• In the early stages of a business recession investment managers usually buy:
• An easing of money and credit would come from which combination?
• Which of the following is NOT an element of total return to the participant in a profit sharing retirement plan?
• Which of the following is not a qualifying event that permits conversion of a NICRUT to a STANCRUT?
• Without specific language in the instrument, a trust is considered by common law to be which?
• Which statement defines a skip person in a trust context?
• For the following condition indicate the Equity Management Style that the following characteristic would tend to represent on a relative basis. Financial Sector
• All of the following are leading economic indicators EXCEPT:
• When should a trustee communicate a discretionary transaction that will materially affect beneficiaries?
• Which type of bond is backed by the revenue generated by a specific project rather than by the issuer's general credit?
• Which asset allocation MOST benefits the income beneficiary and penalizes the remaindermen?
• What is a primary reason to invest internationally?
• Diversification is best described as which?
• The inclusion ratio of 67% for the described trust indicates what about GST tax treatment?
• Once a will is properly drafted, it is valid in which jurisdiction?
• Which statement about a QTIP trust 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?
• 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?
• Stock prices are a ________ indicator.
• Life insurance proceeds tax consequences when policy ownership transferred to irrevocable trust and death occurs?
• If a decedent’s estate contains an antique automobile and a director wishes to purchase it, what is the proper course of action?
• Which of the following is taxable, federally?
• A pooled income fund should NOT invest in which of the following?
• Which of the following is NOT an accepted method of creating a QDOT?
• Which factor does NOT impact the value of the remainder in a Charitable Remainder Unitrust described in the scenario?
• 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?
• 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?
• What is the method to determine the price-to-earnings ratio for a stock?
• Which of the following is an intangible asset?
• In a zeroed-out GRAT, which outcome would prevent the grantor from receiving an estate planning benefit?
• Naming a trust as the beneficiary of an IRA rollover at the owner's death can produce which result?
• Which of the following is an example of tangible personal property?
• 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?
• In a trust with a power of appointment, which option correctly identifies the type of power associated with the 5x5 power?
• In GST planning, what are the target inclusion ratio values to achieve GSTT exemption or full taxation?
• Shareholders must receive financial statements from investment companies with what frequency?
• Which retirement plan is an example of a Defined Benefit plan?
• Which statement about grantor retained annuity trusts (GRATs) is FALSE?
• 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?
• What term describes the relative sensitivity of a stock's return to the market's return?
• Which statement about general powers of appointment carry transfer tax consequences?
• In portfolio analysis, the alpha coefficient is best described as:
• Which of the following is an advantage of a QTIP trust over a life estate or general power of appointment trust?
• Distributions from a charitable remainder trust to the non-charitable beneficiaries are:
• 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?
• In property interests, which statement correctly defines a reversion?
• 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?
• Which statement about alimony and child support for gross income purposes is correct?
• How does the Fed conduct monetary policy?
• Which bond is secured by real estate as collateral?
• The term 'listed stock' refers to any stock:
• Which of the following is a permissible investment in an IRA or IRA rollover?
• With the GSTT exemption used, a $10,000 bequest to a non-family skip person yields approximately what net amount to the recipient?
• Which statement best describes control under a QTIP arrangement?
• 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?
• 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?
• In an ESOP of a closely held business, which cost factor is commonly a concern?
• Declared dividends are paid to stockholders registered on the books on or before which date?
• 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?
• 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?
• What is the rate banks pay when they borrow money from their district Federal Reserve bank?
• Which statement BEST describes an ESTATE as an income tax reporting entity?
• Communication responsibility regarding discretionary decisions?
• Which statement about the QTIP election and marital deduction is true?
• A clause which states 'an amount equal to... should be placed in trust...' is an example of which?
• What is the correct expression for the Applicable Rate in GST planning when the tax rate is 40%?
• Which rate is the rate banks charge each other in the interbank market, typically above the discount rate?
• 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?
• A fidelity bond covers which of the following types of losses?
• Which statement BEST describes the timing of an estate's income tax reporting period?
• Under alternate valuation, which statement is true about cost basis for capital gains purposes?
• 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?
• Under the conduit theory for a regulated investment company, which statement is correct?
• Regulation 9 allows which of the following?
• Which of the following is NOT a characteristic of tenancy-by-the-entirety ownership?
• Which of the following best defines a caveat?
• Which investment would a pooled income fund most reasonably avoid?
• Cyclical changes in the business cycle would most likely have the greatest effect on which type of company?
• Which statement accurately indicates whether Fred can make a qualified disclaimer, and why, in the trust arrangement described?
• The required beginning date for a traditional IRA owner who was born August 10, 1948, is:
• The conveyance 'O to A for life and then to B' creates which of the following sets of interests?
• 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?
• Which of the following assets is ERISA NOT required to be held by the trustee in a qualified retirement plan?
• Which statement best describes a contingent remainder in a life estate context?
• In GST planning, what does an inclusion ratio of 0 indicate?
• On which tax return is the alternate valuation date elected?
• Which of the following accounts generally may NOT hold real property?
• If interest rates are expected to decline, which treasury bond would offer the greatest potential for price appreciation?
• Which is 'triple exempt'?
• Bank policy question: The correct action when a depositor asks to prepare a simple will?
• Regarding distributable net income (DNI), which statement is correct?
• Under the conveyance 'O to A for life and then to B', who holds the life estate?
• 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 payment formula change is acceptable for a Charitable Remainder Trust with a "Flip" provision?
• Income in Respect of a Decedent (IRD) must be treated how for gross income tax purposes?
• Which of the following is NOT required in a QTIP trust?
• 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
• An inverted yield curve implies that which of the following is true about long-term rates versus short-term rates?
• A value manager's portfolio would be expected to:
• Setting the investment objectives for a customer does NOT include:**
• Which factors will impact the value of a Charitable Remainder Unitrust's remainder at inception?
• Declared dividends are paid to stockholders registered on the books on or before the:
• A life estate could be accompanied by which of the following?
• Under the conduit theory, the investment income from a regulated investment company is taxed to the investor. Which of the following is true?
• 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?
• Alternate valuation date is allowed on an estate tax return if which conditions are met?
• In a Crummey trust provision, the power of appointment granted to the beneficiary is described as which type?
• Which type of municipal bond is backed by the full faith and credit of the issuing municipality?
• What term describes the date on which a bond repays its face value to the holder?
• 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 type of bond is generally exempt from federal income tax?
• In a GRAT scenario, the portion of the trust included in the grantor's estate is determined by which rate?
• An example of a defensive stock is a:
• Which clause would MOST LIKELY be considered a general power of appointment?
• What does per stirpes distribution mean in the context of trusts?
• If inclusion ratio is 0.25 and tax rate is 40%, what is the applicable rate?
• Which of the following is taxable, at the state level?
• All of the following dates are established by the board of directors with regard to paying dividends EXCEPT:
• Which statement about alternate valuation of a decedent's estate is true?
• 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 would be covered under a typical flood policy scenario with heavy rain causing a creek to overflow?
• Under the 2017 Tax Act, what is the highest combined tax rate on an individual’s investment income?
• Which arrangements permit fiscal year election for income tax reporting?
• Which statement BEST describes the timing of an estate's income tax reporting period?
• 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?
• In a QTIP arrangement, which provision is required?
• Duty to inform remainder beneficiaries of a revocable trust while the settlor is alive and competent?
• Debentures are backed by:
• A value manager's portfolio would be expected to...
• 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?
• Which of the following best defines an equity security?
• Which of the following is NOT an element of a non-qualified deferred compensation plan?
• Diversification primarily aims to reduce which type of risk?
• 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?
• To avoid a penalty for underpayment of taxes, what could M do?
• In the revocable trust example, who served as successor trustee after Franklin's death?
• In indicating the investment style associated with a given standard deviation higher than the market, which style is most likely?
• In an irrevocable trust holding rental property, when is it permissible to rent to an employee of the trust department?
• Which of the following is NOT a characteristic of a qualified domestic trust (QDT)?
• Which term describes preferred stock that can be converted into common stock?
• Which bond type is unsecured and backed by general credit?
• Which of the following items comprising a decedent's estate is NOT income in respect of a decedent?
• Which retirement plan is an example of a Defined Contribution plan?
• What is the main tax effect of a QTIP election?
• If you own a 7% bond maturing in twenty years, and long-term rates go to 10%, which scenario is most likely?
• The term 'bear market' describes the stock market:
• Which statement accurately describes tenancy by the entirety?
• Absent any relevant language in the instrument, under common law a trust is considered to be which of the following?
• Convertible preferred stock is a type of preferred stock that permits the owner to convert it into common stock under set terms.
• Which tax-related issue is commonly associated with ESOPs?
• Which form is used to report the federal estate tax?
• In a divorce scenario, if alimony and punitive damages are involved, which amount is included in income?
• Which statement about medical expenses paid on behalf of an individual to a medical care provider is false?
• 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?
• Which policy describes actions by a central bank to influence the economy by controlling the money supply and interest rates?
• Under the duty of loyalty, which action by a corporate trustee regarding shares held by the trust would NOT violate loyalty?
• Investors in high marginal tax brackets are LEAST likely to be interested in which of the following?
• What term describes the government's use of taxes and spending to influence the economy?
• When assets are transferred to children, who is taxed on the income and at what rate?
• When do stock prices tend to peak relative to a recession?
• Which statement about a general power of appointment and tax consequences is accurate?
• What annual review requirement applies to assets in an account?
• Which option correctly assigns tax statuses for Corporate bonds, Government bonds, In-state municipal bonds, and Out-of-state municipal bonds?
• Which of the following best describes the income taxation of estates?
• Which form is used to report the estate's fiduciary income tax?
• Which statement is true about QDOT usage?
• In a portfolio designed for income beneficiaries, which statement is most accurate?
• Which statement correctly describes a skip person within a trust?
• For jointly owned property between a decedent and a spouse with right of survivorship, the decedent's gross estate includes the decedent's share.
• Which statement describes a Charitable Remainder Unitrust payout?
• 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
• Payments made directly to an educational institution for tuition on behalf of grandchildren are:
• Corporate bonds are securities representing corporate:
• What is the best definition of a constructive trust?
• 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).