CFP® Practice Question

Evelyn, age 76, must take a required minimum distribution (RMD) of $40,000 from her traditional IRA in 2026. She does not need the income and plans to donate $25,000 to a qualified charity. Which of the following strategies would MOST effectively reduce Evelyn’s adjusted gross income (AGI)? Take the full RMD and then claim a…

In 2026, a married couple filing jointly has modified adjusted gross income (MAGI) of $320,000, including $40,000 of net investment income. Assuming no other limitations apply, how much of their net investment income is subject to the 3.8% Net Investment Income Tax (NIIT)?  The NIIT threshold in 2026 is $250,000. $0 $20,000 $40,000 $70,000 CLICK…

Which of the following statements regarding a revocable living trust is CORRECT? Assets transferred to the trust are removed from the grantor’s taxable estate The trust provides income tax-free growth during the grantor’s lifetime The grantor retains control over trust assets and may amend the trust The trust avoids gift tax reporting because it is…

In 2026, a client donates publicly traded stock held for more than one year to a qualified charity. The stock has a fair market value of $50,000 and a cost basis of $12,000. Which of the following statements is CORRECT? The client may deduct only the $12,000 cost basis The client recognizes a $38,000 capital…

James (age 66) retires in 2026 and is evaluating how to fund his living expenses. He needs $80,000 after tax this year. His available assets include: Traditional IRA: $1,000,000 (all pre-tax) Roth IRA: $200,000 Taxable brokerage account: $300,000 (basis $200,000) Assume: Ordinary income tax rate: 24% Long-term capital gains tax rate: 15% No Social Security…

In 2026, a married couple makes a gift of $60,000 to their adult child. They elect to split the gift. How much of the gift will be considered a taxable gift?   $0 $22,000 $41,000 $60,000 CLICK TO REVEAL ANSWER Expand B is the answer.   In 2026, the annual gift tax exclusion is $19,000…

Which of the following bonds would be MOST sensitive to changes in interest rates? A 2-year Treasury bond A 5-year corporate bond A 10-year municipal bond A 30-year Treasury bond CLICK TO REVEAL ANSWER Expand D is the answer.   Interest rate risk increases with longer maturities. A 30-year bond has the greatest duration and…

A client withdraws $30,000 from her Roth IRA in 2026. The account consists of $20,000 in contributions and $10,000 in earnings. She is age 45 and does not meet any exception to the early withdrawal penalty. How will the $30,000 distribution be treated for tax purposes? Entire amount is tax-free and penalty-free Contributions are tax-free;…

A CFP® professional is evaluating a client’s life insurance needs using the capital needs analysis approach.  Which of the following would be classified as a capital need rather than an income need?  Monthly living expenses for surviving family members Future college education costs for children Mortgage payoff at death Replacement of the client’s salary CLICK…

A client turns age 73 in 2026 and must begin taking required minimum distributions (RMDs) from her traditional IRA.  Which of the following statements is CORRECT regarding her first RMD?  It must be taken by December 31, 2026 It may be delayed until April 1, 2027 It is not required until age 75 It can…