CANNON CTFA 2025/2026 QUESTIONS WITH ANSWERS
RATED A+
✔✔Which of the following is NOT an element of a non-qualified deferred compensation
plan?
A. The plan must be in place in writing prior to the compensation being earned
B. The plan must treat all employees similarly
C. The plan assets may be available to creditors if the firm declares bankruptcy
D. The employee's access to the funds is delayed for some period - ✔✔B. The plan
must treat all employees similarly
✔✔Under the 2017 Tax Act, the highest combined tax rate on an individual taxpayer's
investment income is which of the following:
A. 35%
B. 39%
C. 40.8%
D. 44.3% - ✔✔C. 40.8%
As a result of the 2017 Tax Act, beginning in 2018 the highest income tax rate on an
individual's investment income is 37%. In addition, taxpayers in the 37% tax bracket pay
the 3.8 percent net investment income tax (NIIT, also known the "Medicare tax"), which
was created by the Patient Protection and Affordable Care Act of 2010, making 40.8
percent the highest combined tax rate on investment income.
✔✔Wis in the middle of a difficult divorce from H. As part of the divorce settlement, W
receives $10,000 in alimony and $20,000 in child support per year from H. Additionally,
W wins a suit against H for fraud and recovers $20,000 in punitive damages. What
should W
include as income?
A. $10,000
B. $20,000
C. $30,000
D. $50,000 - ✔✔B. $20,000
Neither alimony payments nor child support are
included in income. Punitive damages from a successful lawsuit are also included in
income.
✔✔In 2017, M had an AGI greater than $150,000 and a federal income tax liability of
$40,000. In 2018, M expects a tax liability of $50,000. Only $3,000 per month is being
withheld from M's wages. Assume that M has met her tax liability since 1986 through
, withholding. How can M prevent being assessed a penalty for underpayment of $14,000
($50,000 - $36,000) in taxes?
A. M can make quarterly estimated tax payments equal to 110% of her 2017 tax liability.
B. M can make a lump-sum payment before December 31, 2018, to make up the
difference.
C. M can deposit the $14,000 in escrow until she files her tax return for 2016, and adopt
a wait-and-see approach regarding a potential underpayment.
D. M can wait until the IRS challenges her 2018 return and then file an amended
withholding certificate. - ✔✔A. M can make quarterly estimated tax payments equal to
110% of her 2017 tax liability.
M must make quarterly estimated tax payments to avoid being assessed a penalty for
underpayment. No penalty will be assessed if the payments equal 110% of last year's
tax liability ($44,000) or 90% of the current year's tax liability, which is estimated at
$45,000 (90% x $50,000).
✔✔0 owns a house that he rents to L. L pays yearly rent of $15,000. L also agreed to
pay O's mortgage on the house in the amount of $1,000 per month. L has built a
swimming pool on the property, which increased the value of the property by $8,000.
What is O's rental
income for the year?
A. $15,000
B. $19,000
C. $23,000
D. $27,000 - ✔✔D. $27,000
L's payment of O's mortgage expense is considered additional income. O therefore has
total rental income of $27,000, which must be included in gross income. The
improvements made by L are not included in O's income unless L agreed to make the
improvements as part of the rental agreement.
✔✔Daughter receives the following items in one tax year: (1) $50,000 salary; (2) $1,000
year end bonus; (3) $5,000 gift from her mother; and (4) bequest from her father's
estate, which includes $1,000 in dividends that had been declared before her father's
death but not
payable until after. What is included in Daughter's gross income?
A. $50,000
B. $51,000
C. $52,000
D. $57,000 - ✔✔C. $52,000
Daughter's salary and her year-end bonus are both
RATED A+
✔✔Which of the following is NOT an element of a non-qualified deferred compensation
plan?
A. The plan must be in place in writing prior to the compensation being earned
B. The plan must treat all employees similarly
C. The plan assets may be available to creditors if the firm declares bankruptcy
D. The employee's access to the funds is delayed for some period - ✔✔B. The plan
must treat all employees similarly
✔✔Under the 2017 Tax Act, the highest combined tax rate on an individual taxpayer's
investment income is which of the following:
A. 35%
B. 39%
C. 40.8%
D. 44.3% - ✔✔C. 40.8%
As a result of the 2017 Tax Act, beginning in 2018 the highest income tax rate on an
individual's investment income is 37%. In addition, taxpayers in the 37% tax bracket pay
the 3.8 percent net investment income tax (NIIT, also known the "Medicare tax"), which
was created by the Patient Protection and Affordable Care Act of 2010, making 40.8
percent the highest combined tax rate on investment income.
✔✔Wis in the middle of a difficult divorce from H. As part of the divorce settlement, W
receives $10,000 in alimony and $20,000 in child support per year from H. Additionally,
W wins a suit against H for fraud and recovers $20,000 in punitive damages. What
should W
include as income?
A. $10,000
B. $20,000
C. $30,000
D. $50,000 - ✔✔B. $20,000
Neither alimony payments nor child support are
included in income. Punitive damages from a successful lawsuit are also included in
income.
✔✔In 2017, M had an AGI greater than $150,000 and a federal income tax liability of
$40,000. In 2018, M expects a tax liability of $50,000. Only $3,000 per month is being
withheld from M's wages. Assume that M has met her tax liability since 1986 through
, withholding. How can M prevent being assessed a penalty for underpayment of $14,000
($50,000 - $36,000) in taxes?
A. M can make quarterly estimated tax payments equal to 110% of her 2017 tax liability.
B. M can make a lump-sum payment before December 31, 2018, to make up the
difference.
C. M can deposit the $14,000 in escrow until she files her tax return for 2016, and adopt
a wait-and-see approach regarding a potential underpayment.
D. M can wait until the IRS challenges her 2018 return and then file an amended
withholding certificate. - ✔✔A. M can make quarterly estimated tax payments equal to
110% of her 2017 tax liability.
M must make quarterly estimated tax payments to avoid being assessed a penalty for
underpayment. No penalty will be assessed if the payments equal 110% of last year's
tax liability ($44,000) or 90% of the current year's tax liability, which is estimated at
$45,000 (90% x $50,000).
✔✔0 owns a house that he rents to L. L pays yearly rent of $15,000. L also agreed to
pay O's mortgage on the house in the amount of $1,000 per month. L has built a
swimming pool on the property, which increased the value of the property by $8,000.
What is O's rental
income for the year?
A. $15,000
B. $19,000
C. $23,000
D. $27,000 - ✔✔D. $27,000
L's payment of O's mortgage expense is considered additional income. O therefore has
total rental income of $27,000, which must be included in gross income. The
improvements made by L are not included in O's income unless L agreed to make the
improvements as part of the rental agreement.
✔✔Daughter receives the following items in one tax year: (1) $50,000 salary; (2) $1,000
year end bonus; (3) $5,000 gift from her mother; and (4) bequest from her father's
estate, which includes $1,000 in dividends that had been declared before her father's
death but not
payable until after. What is included in Daughter's gross income?
A. $50,000
B. $51,000
C. $52,000
D. $57,000 - ✔✔C. $52,000
Daughter's salary and her year-end bonus are both
