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CFP EXAM QUESTIONS WITH DETAILED
VERIFIED ANSWERS
Which Options are bullish Ans: Buy call and sell put
How do you determine in the money on a call option? Ans: Stock price-
strike price
T/F: intrinsic value of an option can be negative. Ans: False
Do you have an obligation to buy/sell on an option or futures contract?
Ans: Futures
All assets are capital assets except (ACID) Ans: 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? Ans: 500k; 250k and must meet two year
rule
What are exclusions to the two year rule for cap gain exclusion on
primary residence? Ans: Job change or health change
What is the gain and loss treatment of a personal asset? Ans: 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? Ans: Gain: short
term or long-term gain, depending on holding period
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Loss: loss deductible to extent capital gains plus $3000
What is the gain and lost treatment on a trade or business asset? Ans:
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? Ans: Gain:
ordinary income
Loss: ordinary loss deductible against ordinary income
1231 property includes (6) Ans: Buildings, Machinery, equipment, land,
buz buildings, leasehold improvements.
1231 property are taxed what when sold? Ans: Capital Gain
1231 property is taxed as what when sold at a loss Ans: 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? Ans:
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) Ans: 1.
Find adjusted basis. 13,000-5000 = 8000 ATB
2. 19,500-8000 = 11,500
3. 11,500-5000.
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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) Ans: 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? Ans: FMV
Property received as a gift is always the donee's basis except for what 2
exceptions? Ans: 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 Ans: 1. Sale price>donors
basis=donors basis
2. Sale price<fmv=fmv
3. Sale price between donors basis and fmv=donors basis
CFP EXAM QUESTIONS WITH DETAILED
VERIFIED ANSWERS
Which Options are bullish Ans: Buy call and sell put
How do you determine in the money on a call option? Ans: Stock price-
strike price
T/F: intrinsic value of an option can be negative. Ans: False
Do you have an obligation to buy/sell on an option or futures contract?
Ans: Futures
All assets are capital assets except (ACID) Ans: 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? Ans: 500k; 250k and must meet two year
rule
What are exclusions to the two year rule for cap gain exclusion on
primary residence? Ans: Job change or health change
What is the gain and loss treatment of a personal asset? Ans: 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? Ans: Gain: short
term or long-term gain, depending on holding period
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Loss: loss deductible to extent capital gains plus $3000
What is the gain and lost treatment on a trade or business asset? Ans:
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? Ans: Gain:
ordinary income
Loss: ordinary loss deductible against ordinary income
1231 property includes (6) Ans: Buildings, Machinery, equipment, land,
buz buildings, leasehold improvements.
1231 property are taxed what when sold? Ans: Capital Gain
1231 property is taxed as what when sold at a loss Ans: 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? Ans:
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) Ans: 1.
Find adjusted basis. 13,000-5000 = 8000 ATB
2. 19,500-8000 = 11,500
3. 11,500-5000.
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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) Ans: 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? Ans: FMV
Property received as a gift is always the donee's basis except for what 2
exceptions? Ans: 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 Ans: 1. Sale price>donors
basis=donors basis
2. Sale price<fmv=fmv
3. Sale price between donors basis and fmv=donors basis
