CFP® Practice Question

In 2026, which of the following taxpayers may make a full Roth IRA contribution, assuming all other eligibility requirements are met? Single filer with MAGI of $270,000 Married filing jointly with MAGI of $255,000 Head of household with MAGI of $130,000 Married filing separately with MAGI of $15,000 CLICK TO REVEAL ANSWER Expand C is…

A CFP® professional is reviewing a client’s Form 1040. Which of the following best describes how taxable income is calculated? Total income reduced by tax credits Adjusted gross income reduced by deductions Gross income reduced by exclusions Total income reduced by adjustments and credits CLICK TO REVEAL ANSWER Expand B is the answer. Taxable income =…

Which of the following tax credits, if any, is available to a taxpayer regardless of adjusted gross income (AGI)? Earned Income Tax Credit Credit for the Elderly or Disabled Adoption Expense Credit Foreign Tax Credit CLICK TO REVEAL ANSWER Expand D is the answer. There is no AGI phase-out for the Foreign Tax Credit.  It…

In 2026, James turns age 73. He owns the following retirement accounts: Traditional IRA: $480,000 Former employer’s 401(k): $320,000 Roth IRA: $150,000 James is retired and does not work for the employer sponsoring the 401(k). What is James’s minimum required distribution obligation for 2026? RMDs must be taken from the traditional IRA and the 401(k), but…

Which phase of the business cycle is typically characterized by declining corporate profits, rising unemployment, tightening credit conditions, and falling consumer confidence? Expansion Peak Contraction Trough CLICK TO REVEAL ANSWER Expand C is the answer.

In 2026, Thomas is age 45 and works as an electrician. Due to a severe spinal injury, he is no longer able to perform substantial work. His physician expects the condition to last at least 18 months. Thomas currently earns $3,820 per month from part-time consulting work. He is not blind and has sufficient work credits to…

In 2026, Maria, age 52, is single and has MAGI of $210,000, making her ineligible to contribute directly to a Roth IRA. She makes a $7,500 nondeductible contribution to a traditional IRA and immediately converts the entire balance to a Roth IRA. At the time of conversion, Maria also owns a rollover traditional IRA from a former…

If a client dies intestate, which of the following statements is correct? All assets automatically pass by beneficiary designation The state determines how probate assets are distributed The executor can distribute assets according to verbal wishes Property held jointly with rights of survivorship becomes subject to probate CLICK TO REVEAL ANSWER Expand B is the…

Under an HO-3 homeowners’ policy, which of the following losses is NOT covered unless an endorsement is purchased? Fire damage to the dwelling Theft of personal property Damage caused by a burst pipe Flood damage from rising groundwater CLICK TO REVEAL ANSWER Expand D is the answer. An HO-3 policy covers the dwelling for open perils and…

Linda sells stock she has held for 14 months at a $12,000 gain. She is in the 24% marginal income tax bracket. How is the gain taxed? As ordinary income at 24% As a long-term capital gain at 15% As a long-term capital gain at 20% As a qualified dividend taxed at 15% CLICK TO…