CANNON CTFA FINAL PAPER 2025/2026 QUESTIONS WITH
ANSWERS RATED A+
✔✔Cyclical changes in the business cycle would most likely have the greatest effect on
a:
A. utility company.
B. food retailer.
C. brewery.
D. machine tool company. - ✔✔D. machine tool company.
✔✔Stock prices are a ________ indicator.
A. leading
B. lagging
C. coincident
D. none of the above - ✔✔A. leading
✔✔All of the following are leading economic indicators EXCEPT:
A. New orders for consumer goods and services
B. Manufacturing and trade sales
C. The S&P 500 stock index
D. Money supply - ✔✔B. Manufacturing and trade sales
✔✔A value managers portfolio would be expected to:
A. have a PE ratio higher than the market.
B. sell at a premium to the S&P.
C. have a Beta equal to the market or less.
D. have a yield lower than the market. - ✔✔C. have a Beta equal to the market or less.
✔✔Indicate for the following condition the type of investment style each characteristic
would tend to represent on a relative basis.
Standard Deviation higher than the Market.
A. Growth
B. Value
C. Both - ✔✔A. Growth
✔✔Which of the following best defines a caveat?
A. An amendment to a will.
B. An action filed in probate court objecting to a will.
,C. An action filed in probate court to dismiss an executor.
D. The document issued by the probate court giving the executor official capacity to act
as a personal representative for decedent's estate. - ✔✔B. An action filed in probate
court objecting to a will.
✔✔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?
A. None. There is no marital deduction for assets passing to a non-citizen spouse.
B. $100,000 as indexed.
C. $10,000,000 as indexed.
D. Unlimited since the decedent is a U.S. citizen. - ✔✔A. None. There is no marital
deduction for assets passing to a non-citizen spouse.
✔✔Franklin created a revocable trust with income payable to his son, Fred, after
Franklin's death. At Fred's death, the trust assets pass to Fred's son, Paul, if living, or to
Paul's issue per stirpes. Franklin died three years ago. He acted as trustee until his
death. Thereafter, Fred was successor trustee. Paul died last year, leaving two
daughters. Fred would like to disclaim any interest in the trust assets so that they will be
distributed to Paul's daughters, Freida and Sue. Which of the following indicates
whether Fred can make a qualified disclaimer, and why?
A. He can, if the disclaimer is properly executed and filed within 9 months after Paul's
death.
B. He can, if the disclaimer is properly executed and filed within 9 months after Paul's
will is admitted to probate.
C. He can, if the disclaimer is executed and filed within 9 months after Paul's death, but
the disclaimer must be limited to Fred's actuarial in - ✔✔D. He cannot, since no
disclaimer can be made that would be recognized for federal transfer tax purposes at
this point.
✔✔Keith died in November. In December, his company paid his estate $100,000 in
deferred compensation. Kieth left his entire estate to his brother Michael. Which of the
following tax returns will NOT be affected by this payment?
A. US Estate Tax (Form 706)
B. Keith's final US individual income tax (Form 1040)
C. Keith's estate's US fiduciary income tax (Form 1041)
D. Michael's US individual income tax (Form 1040) - ✔✔B. Keith's final US individual
income tax (Form 1040)
✔✔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?
A. $25,000
B. $60,000
C. $85,000
D. it depends on the fiscal year chosen for her estate - ✔✔D. it depends on the fiscal
year chosen for her estate
✔✔Which of the following best describes the income taxation of estates?
A. Taxable income will be taxed twice, once to the estate when earned and again to the
beneficiary upon distribution.
B. Taxable income will be taxed only once, either to the estate when earned or to the
beneficiary when distributed in the same tax year.
C. Taxable income will be taxed only once o the extent of distributable net income (DNI)
and twice when distributions exceed DNI.
D. Taxable income will be taxed twice to the extent of distributable net income (DNI)
and only once when distributions exceed DNI. - ✔✔B. Taxable income will be taxed only
once, either to the estate when earned or to the beneficiary when distributed in the
same tax year.
✔✔Which of the following items comprising a decedent's estate is NOT income in
respect of a decedent?
A. Director's fee owed to the decedent
B. Life insurance payable to the estate
C. Profit-sharing plan account naming the estate as beneficiary
D. IRA naming the estate as beneficiary - ✔✔B. Life insurance payable to the estate
✔✔Regulation 9 allows which of the following?
A. A national bank acting as trustee to sell assets to or purchase assets from another
trust account for which it serves as trustee.
B. Directors of national banks to purchase assets from a trust administered by the
national bank if the price is equitable.
C. A national bank trust department managing a trust to pay a trust officer individually
for work as a co-trustee, without approval of the board of directors.
D. Advertisement of a common trust fund's performance as long as the reporting
measurements meet AIMR standards. - ✔✔A. A national bank acting as trustee to sell
assets to or purchase assets from another trust account for which it serves as trustee.
✔✔Which of the following is the best definition of a constructive trust?
A. Trust created by explicit instructions, given either orally or in writing.
ANSWERS RATED A+
✔✔Cyclical changes in the business cycle would most likely have the greatest effect on
a:
A. utility company.
B. food retailer.
C. brewery.
D. machine tool company. - ✔✔D. machine tool company.
✔✔Stock prices are a ________ indicator.
A. leading
B. lagging
C. coincident
D. none of the above - ✔✔A. leading
✔✔All of the following are leading economic indicators EXCEPT:
A. New orders for consumer goods and services
B. Manufacturing and trade sales
C. The S&P 500 stock index
D. Money supply - ✔✔B. Manufacturing and trade sales
✔✔A value managers portfolio would be expected to:
A. have a PE ratio higher than the market.
B. sell at a premium to the S&P.
C. have a Beta equal to the market or less.
D. have a yield lower than the market. - ✔✔C. have a Beta equal to the market or less.
✔✔Indicate for the following condition the type of investment style each characteristic
would tend to represent on a relative basis.
Standard Deviation higher than the Market.
A. Growth
B. Value
C. Both - ✔✔A. Growth
✔✔Which of the following best defines a caveat?
A. An amendment to a will.
B. An action filed in probate court objecting to a will.
,C. An action filed in probate court to dismiss an executor.
D. The document issued by the probate court giving the executor official capacity to act
as a personal representative for decedent's estate. - ✔✔B. An action filed in probate
court objecting to a will.
✔✔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?
A. None. There is no marital deduction for assets passing to a non-citizen spouse.
B. $100,000 as indexed.
C. $10,000,000 as indexed.
D. Unlimited since the decedent is a U.S. citizen. - ✔✔A. None. There is no marital
deduction for assets passing to a non-citizen spouse.
✔✔Franklin created a revocable trust with income payable to his son, Fred, after
Franklin's death. At Fred's death, the trust assets pass to Fred's son, Paul, if living, or to
Paul's issue per stirpes. Franklin died three years ago. He acted as trustee until his
death. Thereafter, Fred was successor trustee. Paul died last year, leaving two
daughters. Fred would like to disclaim any interest in the trust assets so that they will be
distributed to Paul's daughters, Freida and Sue. Which of the following indicates
whether Fred can make a qualified disclaimer, and why?
A. He can, if the disclaimer is properly executed and filed within 9 months after Paul's
death.
B. He can, if the disclaimer is properly executed and filed within 9 months after Paul's
will is admitted to probate.
C. He can, if the disclaimer is executed and filed within 9 months after Paul's death, but
the disclaimer must be limited to Fred's actuarial in - ✔✔D. He cannot, since no
disclaimer can be made that would be recognized for federal transfer tax purposes at
this point.
✔✔Keith died in November. In December, his company paid his estate $100,000 in
deferred compensation. Kieth left his entire estate to his brother Michael. Which of the
following tax returns will NOT be affected by this payment?
A. US Estate Tax (Form 706)
B. Keith's final US individual income tax (Form 1040)
C. Keith's estate's US fiduciary income tax (Form 1041)
D. Michael's US individual income tax (Form 1040) - ✔✔B. Keith's final US individual
income tax (Form 1040)
✔✔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?
A. $25,000
B. $60,000
C. $85,000
D. it depends on the fiscal year chosen for her estate - ✔✔D. it depends on the fiscal
year chosen for her estate
✔✔Which of the following best describes the income taxation of estates?
A. Taxable income will be taxed twice, once to the estate when earned and again to the
beneficiary upon distribution.
B. Taxable income will be taxed only once, either to the estate when earned or to the
beneficiary when distributed in the same tax year.
C. Taxable income will be taxed only once o the extent of distributable net income (DNI)
and twice when distributions exceed DNI.
D. Taxable income will be taxed twice to the extent of distributable net income (DNI)
and only once when distributions exceed DNI. - ✔✔B. Taxable income will be taxed only
once, either to the estate when earned or to the beneficiary when distributed in the
same tax year.
✔✔Which of the following items comprising a decedent's estate is NOT income in
respect of a decedent?
A. Director's fee owed to the decedent
B. Life insurance payable to the estate
C. Profit-sharing plan account naming the estate as beneficiary
D. IRA naming the estate as beneficiary - ✔✔B. Life insurance payable to the estate
✔✔Regulation 9 allows which of the following?
A. A national bank acting as trustee to sell assets to or purchase assets from another
trust account for which it serves as trustee.
B. Directors of national banks to purchase assets from a trust administered by the
national bank if the price is equitable.
C. A national bank trust department managing a trust to pay a trust officer individually
for work as a co-trustee, without approval of the board of directors.
D. Advertisement of a common trust fund's performance as long as the reporting
measurements meet AIMR standards. - ✔✔A. A national bank acting as trustee to sell
assets to or purchase assets from another trust account for which it serves as trustee.
✔✔Which of the following is the best definition of a constructive trust?
A. Trust created by explicit instructions, given either orally or in writing.
