CFP Exam UPDATED Questions and
CORRECT Answers
Which Options are bullish - CORRECT ANSWER Buy call and sell put
How do you determine in the money on a call option? - CORRECT ANSWER Stock price-
strike price
T/F: intrinsic value of an option can be negative. - CORRECT ANSWER False
Do you have an obligation to buy/sell on an option or futures contract? - CORRECT
ANSWER Futures
All assets are capital assets except (ACID) - CORRECT ANSWER Accounts/notes
receivable
Copyrights and creative works
Inventory
Depreciable property used in trade or business
Married couples may exclude what amount from cap gains on sale of primary residence?
Singles? - CORRECT ANSWER 500k; 250k and must meet two year rule
What are exclusions to the two year rule for cap gain exclusion on primary residence? -
CORRECT ANSWER Job change or health change
What is the gain and loss treatment of a personal asset? - CORRECT ANSWER Gain:
short term or long-term capital gains, depending on holding
Loss: may not be recognized or deducted
,What is the gain and loss treatment on a capital asset? - CORRECT ANSWER Gain: short
term or long-term gain, depending on holding period
Loss: loss deductible to extent capital gains plus $3000
What is the gain and lost treatment on a trade or business asset? - CORRECT
ANSWER Gain: short term or long-term gain, depending on holding.
Loss: ordinary loss deductible against ordinary income
What is the gain and loss treatment on an ordinary asset? - CORRECT ANSWER Gain:
ordinary income
Loss: ordinary loss deductible against ordinary income
1231 property includes (6) - CORRECT ANSWER Buildings, Machinery, equipment,
land, buz buildings, leasehold improvements.
1231 property are taxed what when sold? - CORRECT ANSWER Capital Gain
1231 property is taxed as what when sold at a loss - CORRECT ANSWER Ordinary loss
Depreciation recapture via
1245: personal property in buz used 1 yr or more
1250: real property in buz
What happens for taxes when 1245 assets are sold at a gain? - CORRECT
ANSWER Depreciation taken: ord. Inc.
basis: return of basis
Rest: cap gain
Jason sells a front end loader with a backhoe for $19,500. He had originally purchased it for
$13,000 at an auction and took depreciation of $5000. What is the amount of capital gain?
, (Section 1245 ex) - CORRECT ANSWER 1. Find adjusted basis. 13,000-5000 = 8000
ATB
2. 19,500-8000 = 11,500
3. 11,500-5000.
4. Equals $6500.
Mora owns a daycare. She purchased the property at $600,000 and took depreciation of
$400,000. If she had only taken straight line depreciation, she would have only taken
depreciation of $300,000. She has $300,000 of line depreciation and $100,000 of accelerated
depreciation. She is now considering selling the property for $900,000. What is the capital gain?
(1250 ex) - CORRECT ANSWER 1. Final adjusted basis
600,000-400,000=200,000
2. 900,000-200,000=700,000
3. 700,000-100,000 (excess depreciation)=600,000
4. 600,000-300,000(25% 1250 recapture)= 300,000
4. 300,000 LTCG (sec 1231)
Tax consequences:
Excess dep and 25% recapture ordinary income
Sec 1231 gain is cap gain
Cost basis is always what at death of inherited property? - CORRECT ANSWER FMV
Property received as a gift is always the donee's basis except for what 2 exceptions? - CORRECT
ANSWER 1. Loss property: fmv<donors basis use dbl basis rule
2. Appreciated property when gift tax is paid. Use formula: donors basis+net app in gift/taxable
gift x gift tax pd
Explain 3 dbl basis rule outcomes - CORRECT ANSWER 1. Sale price>donors
basis=donors basis
CORRECT Answers
Which Options are bullish - CORRECT ANSWER Buy call and sell put
How do you determine in the money on a call option? - CORRECT ANSWER Stock price-
strike price
T/F: intrinsic value of an option can be negative. - CORRECT ANSWER False
Do you have an obligation to buy/sell on an option or futures contract? - CORRECT
ANSWER Futures
All assets are capital assets except (ACID) - CORRECT ANSWER Accounts/notes
receivable
Copyrights and creative works
Inventory
Depreciable property used in trade or business
Married couples may exclude what amount from cap gains on sale of primary residence?
Singles? - CORRECT ANSWER 500k; 250k and must meet two year rule
What are exclusions to the two year rule for cap gain exclusion on primary residence? -
CORRECT ANSWER Job change or health change
What is the gain and loss treatment of a personal asset? - CORRECT ANSWER Gain:
short term or long-term capital gains, depending on holding
Loss: may not be recognized or deducted
,What is the gain and loss treatment on a capital asset? - CORRECT ANSWER Gain: short
term or long-term gain, depending on holding period
Loss: loss deductible to extent capital gains plus $3000
What is the gain and lost treatment on a trade or business asset? - CORRECT
ANSWER Gain: short term or long-term gain, depending on holding.
Loss: ordinary loss deductible against ordinary income
What is the gain and loss treatment on an ordinary asset? - CORRECT ANSWER Gain:
ordinary income
Loss: ordinary loss deductible against ordinary income
1231 property includes (6) - CORRECT ANSWER Buildings, Machinery, equipment,
land, buz buildings, leasehold improvements.
1231 property are taxed what when sold? - CORRECT ANSWER Capital Gain
1231 property is taxed as what when sold at a loss - CORRECT ANSWER Ordinary loss
Depreciation recapture via
1245: personal property in buz used 1 yr or more
1250: real property in buz
What happens for taxes when 1245 assets are sold at a gain? - CORRECT
ANSWER Depreciation taken: ord. Inc.
basis: return of basis
Rest: cap gain
Jason sells a front end loader with a backhoe for $19,500. He had originally purchased it for
$13,000 at an auction and took depreciation of $5000. What is the amount of capital gain?
, (Section 1245 ex) - CORRECT ANSWER 1. Find adjusted basis. 13,000-5000 = 8000
ATB
2. 19,500-8000 = 11,500
3. 11,500-5000.
4. Equals $6500.
Mora owns a daycare. She purchased the property at $600,000 and took depreciation of
$400,000. If she had only taken straight line depreciation, she would have only taken
depreciation of $300,000. She has $300,000 of line depreciation and $100,000 of accelerated
depreciation. She is now considering selling the property for $900,000. What is the capital gain?
(1250 ex) - CORRECT ANSWER 1. Final adjusted basis
600,000-400,000=200,000
2. 900,000-200,000=700,000
3. 700,000-100,000 (excess depreciation)=600,000
4. 600,000-300,000(25% 1250 recapture)= 300,000
4. 300,000 LTCG (sec 1231)
Tax consequences:
Excess dep and 25% recapture ordinary income
Sec 1231 gain is cap gain
Cost basis is always what at death of inherited property? - CORRECT ANSWER FMV
Property received as a gift is always the donee's basis except for what 2 exceptions? - CORRECT
ANSWER 1. Loss property: fmv<donors basis use dbl basis rule
2. Appreciated property when gift tax is paid. Use formula: donors basis+net app in gift/taxable
gift x gift tax pd
Explain 3 dbl basis rule outcomes - CORRECT ANSWER 1. Sale price>donors
basis=donors basis
