CFP Book 4 - QBank Questions with
complete solutions
C - correct answer ✔✔Jack was divorced on March 30 of the current year and has not remarried
as of the last day of the tax year. He lives alone in his condo. His ex-wife, Mary, has custody of
their son Jack Jr. What is Jack's filing status for the current tax year?
A) Married filing separately
B) Head of household
C) Single
D) Married filing jointly
B - correct answer ✔✔All of the following statements regarding above-the-line deductions are
CORRECT except
A) these deductions are subtracted from gross income in determining adjusted gross income.
B) these deductions are subtracted from adjusted gross income in determining taxable income.
C) these deductions are allowable regardless of whether the taxpayer claims itemized
deductions.
D) some above-the-line deductions include deductible contributions to IRAs.
A - correct answer ✔✔Which one of the following steps is CORRECT concerning the tax
calculation process?
A) Total tax liability minus withholding and/or estimated tax payments equals refund or tax
owed.
B) Employment eligibility is submitted via Form W4.
C) Tax liability plus tax credits equals refund or tax owed.
D) Total tax liability plus additional taxes owed equals total tax liability.
,B - correct answer ✔✔The effective tax rate is obtained by dividing amount of tax by
A) the marginal tax rate uses.
B) the taxable income.
C) the amount of tax and taxable income.
D) the amount of tax and total income.
D - correct answer ✔✔If Parker, who files as Single, was paid $7,200 in 2022 for working in a
jewelry store and this is his only income for the year, what are the tax effects for him?
A) Parker will be taxed at the estates and trusts tax rate for all amounts in excess of $2,300.
B) Parker will be taxed on $4,900 at the 10% tax rate.
C) Parker will be taxed on $7,200 at the 10% tax rate.
D) Because of Parker's standard deduction for earned income, he will pay no taxes on the
income this year.
C - correct answer ✔✔Ron Phillips, age 43, and Sandy Phillips, age 41, are married with 2
children, Michael, age 12, and Victoria, age 8, who has been blind since her birth. Ron is an
architect and general partner with XYZ partnership. Sandy is self-employed as an attorney and
works out of a home office. Her home office is exclusively and regularly used for business, and
the home office is her principal place of business. Their information for the tax year 2022 is as
follows:
- Adjusted gross income $217,300
- Itemized deductions (including qualified residential mortgage interest, taxes paid, and
charitable contributions) $33,000
Early in the current year, Sandy's father died. Sandy is the sole beneficiary of her father's entire
estate. The estate is presently in probate. Sandy's mother, Lisa, age 68, has moved in with them
but provides her own support. She was married to Sandy's father when he died earlier this year.
,This is Ron's second marriage. He makes monthly support payments to his former wife and his
daughter.
Because both Ron and Sandy are considered self-employed, they make quarterly estimated tax
payments each year to cover both their income tax and self-employment tax obligations.
Based on the information provided in the case scenario, which of the following statements
regarding Lisa's income tax filing status for 2022 is CORRECT?
A) Lisa may file as head of household for 2022.
B) Lisa must file married filing separately for 2022.
C) Lisa may file married filing jointly for 2022.
D) Lisa must file a single return for 2022.
D - correct answer ✔✔Carol, age 50, received a salary of $35,000 this year. In addition, she
received a gift of $1,000 from her brother. She also made a contribution of $3,500 to her
traditional IRA. She files as single, and in addition to her itemized deductions of $4,500, she had
unreimbursed medical expenses from major surgery on her knees of $7,600. Which of the
following best defines Carol's taxable income?
A) Gross income less adjustments to income, less long-term capital losses
B) All cash compensation received during the tax year less medical expenses in excess of 10% of
AGI
C) Adjusted gross income less the standard deduction and itemized deductions
D) Adjusted gross income less the greater of the standard deduction or the amount of itemized
deductions
D - correct answer ✔✔Which one of the following reflects the CORRECT sequence of steps in
the tax calculation process?
A) AGI minus standard or itemized deduction(s) equals total income.
B) AGI minus adjustments to income equals federal taxable income.
, C) Add tax credits to tax liability to get total tax liability.
D) Total income minus adjustments to income and standard or itemized deduction(s) equals
federal taxable income.
B - correct answer ✔✔Sally Franklin has AGI of $300,000. In addition, she currently has passive
income of $150,000 and passive losses of $175,000—$150,000 of which she uses to offset the
passive income and $25,000 of which is subject to disallowance.
Which one of the following investments has the greatest potential for reducing Sally's tax
liability?
A) An equipment-leasing limited partnership producing passive losses
B) A working interest in an oil and gas general partnership
C) A limited partnership involved in a historic rehabilitation project that is producing passive
losses and credits
D) "Active participation" rental real estate that is producing a loss
C - correct answer ✔✔Personal expenses deductible from adjusted gross income most
accurately describes which one of the following?
A) Standard deduction
B) Adjustments to income
C) Itemized deductions
D) Schedule C expenses
A - correct answer ✔✔Which one of the following is not a social objective of the federal
taxation system?
A) Revenue raising
B) Support of charitable organizations
C) Preservation of our nation's historical buildings
D) Relief for certain child care expenses
complete solutions
C - correct answer ✔✔Jack was divorced on March 30 of the current year and has not remarried
as of the last day of the tax year. He lives alone in his condo. His ex-wife, Mary, has custody of
their son Jack Jr. What is Jack's filing status for the current tax year?
A) Married filing separately
B) Head of household
C) Single
D) Married filing jointly
B - correct answer ✔✔All of the following statements regarding above-the-line deductions are
CORRECT except
A) these deductions are subtracted from gross income in determining adjusted gross income.
B) these deductions are subtracted from adjusted gross income in determining taxable income.
C) these deductions are allowable regardless of whether the taxpayer claims itemized
deductions.
D) some above-the-line deductions include deductible contributions to IRAs.
A - correct answer ✔✔Which one of the following steps is CORRECT concerning the tax
calculation process?
A) Total tax liability minus withholding and/or estimated tax payments equals refund or tax
owed.
B) Employment eligibility is submitted via Form W4.
C) Tax liability plus tax credits equals refund or tax owed.
D) Total tax liability plus additional taxes owed equals total tax liability.
,B - correct answer ✔✔The effective tax rate is obtained by dividing amount of tax by
A) the marginal tax rate uses.
B) the taxable income.
C) the amount of tax and taxable income.
D) the amount of tax and total income.
D - correct answer ✔✔If Parker, who files as Single, was paid $7,200 in 2022 for working in a
jewelry store and this is his only income for the year, what are the tax effects for him?
A) Parker will be taxed at the estates and trusts tax rate for all amounts in excess of $2,300.
B) Parker will be taxed on $4,900 at the 10% tax rate.
C) Parker will be taxed on $7,200 at the 10% tax rate.
D) Because of Parker's standard deduction for earned income, he will pay no taxes on the
income this year.
C - correct answer ✔✔Ron Phillips, age 43, and Sandy Phillips, age 41, are married with 2
children, Michael, age 12, and Victoria, age 8, who has been blind since her birth. Ron is an
architect and general partner with XYZ partnership. Sandy is self-employed as an attorney and
works out of a home office. Her home office is exclusively and regularly used for business, and
the home office is her principal place of business. Their information for the tax year 2022 is as
follows:
- Adjusted gross income $217,300
- Itemized deductions (including qualified residential mortgage interest, taxes paid, and
charitable contributions) $33,000
Early in the current year, Sandy's father died. Sandy is the sole beneficiary of her father's entire
estate. The estate is presently in probate. Sandy's mother, Lisa, age 68, has moved in with them
but provides her own support. She was married to Sandy's father when he died earlier this year.
,This is Ron's second marriage. He makes monthly support payments to his former wife and his
daughter.
Because both Ron and Sandy are considered self-employed, they make quarterly estimated tax
payments each year to cover both their income tax and self-employment tax obligations.
Based on the information provided in the case scenario, which of the following statements
regarding Lisa's income tax filing status for 2022 is CORRECT?
A) Lisa may file as head of household for 2022.
B) Lisa must file married filing separately for 2022.
C) Lisa may file married filing jointly for 2022.
D) Lisa must file a single return for 2022.
D - correct answer ✔✔Carol, age 50, received a salary of $35,000 this year. In addition, she
received a gift of $1,000 from her brother. She also made a contribution of $3,500 to her
traditional IRA. She files as single, and in addition to her itemized deductions of $4,500, she had
unreimbursed medical expenses from major surgery on her knees of $7,600. Which of the
following best defines Carol's taxable income?
A) Gross income less adjustments to income, less long-term capital losses
B) All cash compensation received during the tax year less medical expenses in excess of 10% of
AGI
C) Adjusted gross income less the standard deduction and itemized deductions
D) Adjusted gross income less the greater of the standard deduction or the amount of itemized
deductions
D - correct answer ✔✔Which one of the following reflects the CORRECT sequence of steps in
the tax calculation process?
A) AGI minus standard or itemized deduction(s) equals total income.
B) AGI minus adjustments to income equals federal taxable income.
, C) Add tax credits to tax liability to get total tax liability.
D) Total income minus adjustments to income and standard or itemized deduction(s) equals
federal taxable income.
B - correct answer ✔✔Sally Franklin has AGI of $300,000. In addition, she currently has passive
income of $150,000 and passive losses of $175,000—$150,000 of which she uses to offset the
passive income and $25,000 of which is subject to disallowance.
Which one of the following investments has the greatest potential for reducing Sally's tax
liability?
A) An equipment-leasing limited partnership producing passive losses
B) A working interest in an oil and gas general partnership
C) A limited partnership involved in a historic rehabilitation project that is producing passive
losses and credits
D) "Active participation" rental real estate that is producing a loss
C - correct answer ✔✔Personal expenses deductible from adjusted gross income most
accurately describes which one of the following?
A) Standard deduction
B) Adjustments to income
C) Itemized deductions
D) Schedule C expenses
A - correct answer ✔✔Which one of the following is not a social objective of the federal
taxation system?
A) Revenue raising
B) Support of charitable organizations
C) Preservation of our nation's historical buildings
D) Relief for certain child care expenses
