CANNON TRUST SCHOOL I EXAM 2 ACTUAL
PAPER 2026 QUESTIONS WITH SOLUTIONS
GRADED A+
◉ A simple trust earned $27,000 in dividends. It paid $4,000 in
trustee fees, one-half
from income and one-half from principal. Trust accounting income is
which of the following?
- $0
- $23,000
- $25,000
- $27,000. Answer: $25,000
◉ If the Trust Document is silent with respect to a certain cash
transaction, the Trust Administrator should first look to which of the
following for guidance?
- Court of Jurisdiction
- Principal and Income Law of the State
- Grantor
- OCC. Answer: Principal and Income Law of the State
,◉ When determining a long-term sustainable rate of return for a
unitrust payout, which of the following best represents the range of
high confidence payout percentages?
- 1-2%
- 2-3%
- 3-5%
- 120% of the federal midterm rate. Answer: 3-5%
◉ Which of the following is an example of tangible personal
property?
- Gold bar
- Common stock certificate
- Patent
- Vacant land. Answer: Gold bar
◉ Which of the following is an example of tangible personal
property?
- Family residence
- IBM stock
- Jewelry
- Rental house. Answer: Jewelry
,◉ A to B for life, then to C. Following this transfer, which of the
following is true?
- A has a fee simple interest.
- B has a reversionary interest.
- C has a remainder interest.
- C has a life estate.. Answer: C has a remainder interest.
◉ Under joint tenants with rights of survivorship, when one tenant
dies which of the following best describes the result?
- Her share passes through her will to her heirs.
- Her share passes by law to her heirs, not through her will.
- Her share passes to the surviving joint tenant regardless of what
her will says.
- The asset must be sold and the estate gets 1/2 of the proceeds..
Answer: Her share passes to the surviving joint tenant regardless of
what her will says.
◉ A decedent owns $400,000 in his own name, a $200,000 home in
joint tenancy with his spouse and a $100,000 life insurance policy
with the children as beneficiaries. Which of the following is the
amount passing through probate?
- 0.
- $400,000.
, - $500,000.
- $700,000.. Answer: $400,000
◉ In cutting down a tree, which of the following occurs?
- Real property is converted to personal property.
- Personal property is converted to real property.
- Real property is converted to a fixture.
- There is no conversion, the tree remains real property.. Answer:
Real property is converted to personal property.
◉ Which of the following transfers are includable in the gross estate
of the donor if made within 3 years of death?
- Gift of $8,000 cash value life insurance policy to son.
- Gift of $9,800 cash to daughter.
- Gift of $10,000 cash to friend.
- Gift of $5,000 stock in a closely held company to parent.. Answer:
Gift of $8,000 cash value life insurance policy to son.
◉ Which of the following can be deducted either on the decedent's
final 1040 income tax return or on the Form 706 Estate Tax return?
- Funeral expenses.
- Medical expenses relating to the decedent's last illness.
- Court costs in probating the estate.
PAPER 2026 QUESTIONS WITH SOLUTIONS
GRADED A+
◉ A simple trust earned $27,000 in dividends. It paid $4,000 in
trustee fees, one-half
from income and one-half from principal. Trust accounting income is
which of the following?
- $0
- $23,000
- $25,000
- $27,000. Answer: $25,000
◉ If the Trust Document is silent with respect to a certain cash
transaction, the Trust Administrator should first look to which of the
following for guidance?
- Court of Jurisdiction
- Principal and Income Law of the State
- Grantor
- OCC. Answer: Principal and Income Law of the State
,◉ When determining a long-term sustainable rate of return for a
unitrust payout, which of the following best represents the range of
high confidence payout percentages?
- 1-2%
- 2-3%
- 3-5%
- 120% of the federal midterm rate. Answer: 3-5%
◉ Which of the following is an example of tangible personal
property?
- Gold bar
- Common stock certificate
- Patent
- Vacant land. Answer: Gold bar
◉ Which of the following is an example of tangible personal
property?
- Family residence
- IBM stock
- Jewelry
- Rental house. Answer: Jewelry
,◉ A to B for life, then to C. Following this transfer, which of the
following is true?
- A has a fee simple interest.
- B has a reversionary interest.
- C has a remainder interest.
- C has a life estate.. Answer: C has a remainder interest.
◉ Under joint tenants with rights of survivorship, when one tenant
dies which of the following best describes the result?
- Her share passes through her will to her heirs.
- Her share passes by law to her heirs, not through her will.
- Her share passes to the surviving joint tenant regardless of what
her will says.
- The asset must be sold and the estate gets 1/2 of the proceeds..
Answer: Her share passes to the surviving joint tenant regardless of
what her will says.
◉ A decedent owns $400,000 in his own name, a $200,000 home in
joint tenancy with his spouse and a $100,000 life insurance policy
with the children as beneficiaries. Which of the following is the
amount passing through probate?
- 0.
- $400,000.
, - $500,000.
- $700,000.. Answer: $400,000
◉ In cutting down a tree, which of the following occurs?
- Real property is converted to personal property.
- Personal property is converted to real property.
- Real property is converted to a fixture.
- There is no conversion, the tree remains real property.. Answer:
Real property is converted to personal property.
◉ Which of the following transfers are includable in the gross estate
of the donor if made within 3 years of death?
- Gift of $8,000 cash value life insurance policy to son.
- Gift of $9,800 cash to daughter.
- Gift of $10,000 cash to friend.
- Gift of $5,000 stock in a closely held company to parent.. Answer:
Gift of $8,000 cash value life insurance policy to son.
◉ Which of the following can be deducted either on the decedent's
final 1040 income tax return or on the Form 706 Estate Tax return?
- Funeral expenses.
- Medical expenses relating to the decedent's last illness.
- Court costs in probating the estate.
