CFP® Practice Question

In 2026, Thomas dies with a taxable estate of $18,000,000. He made no prior taxable gifts. The Basic Exclusion Amount (BEA) in 2026 is $15,000,000 and the applicable credit amount is $5,945,800. What portion of Thomas’s estate will be subject to federal estate tax? $0 $3,000,000 $12,054,200 $18,000,000 CLICK TO REVEAL ANSWER Expand B is…

In 2026, Maria, age 63, begins receiving Social Security retirement benefits. She earns $50,000 from employment during the year. The 2026 earnings limit for individuals under full retirement age is $24,480. Approximately how much of Maria’s Social Security benefits will be withheld due to the earnings test? $0 $12,760 $12,240 $25,520 CLICK TO REVEAL ANSWER Expand…

A U.S. taxpayer earns income from both U.S. and foreign sources and pays income tax to a foreign government. Which of the following limits the amount of foreign tax credit that may be claimed? The taxpayer’s adjusted gross income The taxpayer’s marginal tax bracket The amount of U.S. tax attributable to foreign-source income The taxpayer’s…

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…