CANNON TRUST SCHOOL II EXAM STUDY
GUIDE 2026 COMPLETE QUESTIONS WITH
CORRECT DETAILED ANSWERS ||
100% GUARANTEED PASS
<RECENT VERSION>
1. Bonds that can be traded for stock are known as - ANSWER ✔ Convertible
Bonds
2. A company most likely will call bonds (assuming bonds are callable) it had
previously issued if what occurs? - ANSWER ✔ Interest Rates Fall
3. The LOWESTS&P's rating that would qualify as investment grade is what? -
ANSWER ✔ BBB-
4. A treasury bill is taxable by which of the following entities? - ANSWER ✔
Higher liquidity and higher marketability
5. You manage a trust that holds zero-coupon bonds. To determine the tax
liability, you should do what? - ANSWER ✔ Report the annual accrual each
year.
6. If investors expect interest rates to increase they will do what? - ANSWER
✔ Decrease Duration
,7. A municipal bond issue secured by the income from a bridge or toll road is
called a: - ANSWER ✔ Revenue Bond Issue
8. Dividend distributions from mutual funds are: - ANSWER ✔ taxable as
ordinary income or qualified dividends depending on status
9. Open-end and closed-end investment companies differ in their - ANSWER
✔ capitalization.
10.Investment companies must issue financial statements to their shareholders:
- ANSWER ✔ semiannually.
11.The price an investor will pay today when purchasing an open-end
investment company is determined from - ANSWER ✔ today's closing
price.
12.Which of the following is NOT a requirement of a QTIP trust?
A. All net accounting income to be paid to the surviving spouse at least
annually.
B. Principal to be distributed at the trustee's discretion for the surviving
spouse's health, education, support, or maintenance.
C. The surviving spouse has the ability to require the trustee to convert
non-income producing assets to income productive assets.
D. The surviving spouse may be the only permissible distributee during
their lifetime. - ANSWER ✔ B. Principal to be distributed at the
trustee's discretion for the surviving spouse's health, education,
support, or maintenance.
,13.In a pro rata fractional formula, which trust is frozen during administration
prior to funding?
A. The marital trust
B. The residual trust
C. Neither, they must share the appreciation/depreciation.
D. Both the marital and residual trusts. - ANSWER ✔ C. Neither, they
must share the appreciation/depreciation.
14.Which of the following is MANDATORY to qualify the general power of
appointment (GPA) marital deduction trust?
A. Right to encroach upon corpus of the marital deduction share by
surviving spouse during lifetime.
B. Ultimate distribution to decedent's heirs.
C. All net accounting income paid at least annually to the surviving
spouse and surviving spouse is given either lifetime GPA or
testamentary GPA.
D. Surviving spouse has the right to make gifts from the marital
deduction share during lifetime. - ANSWER ✔ C. All net accounting
income paid at least annually to the surviving spouse and surviving
spouse is given either lifetime GPA or testamentary GPA.
15.Which of the following is NOT a characteristic of a qualified domestic trust
(QDT)?
A. At least one trustee must be a U.S. citizen or domestic corporation.
B. The executor of the donor's estate must irrevocably elect to have the
trust treated at a QDT.
C. The U.S. trustee must have the right to withhold federal estate taxes
from any principal distribution.
, D. Upon termination of the trust, the U.S. trustee must file a final
accounting with the IRS and a tax at the maximum estate tax rate of
the current fair market value of the trust assets shall be assessed. -
ANSWER ✔ D. Upon termination of the trust, the U.S. trustee must
file a final accounting with the IRS and a tax at the maximum estate
tax rate of the current fair market value of the trust assets shall be
assessed.
16.H's will creates a QTIP marital trust for the benefit of W. The trust provides
that W will receive all of the trust income, and will receive trust principal for
her health and support. W has a limited power of appointment over the trust.
Bank X is designated to serve as the sole trustee. At W's death, any income
or principal she received from the trust will be included in her gross estate.
H's executor will make a QTIP election for this trust on H's federal estate tax
return. The marital trust:
A. will be included in W's gross estate at her death because W had a
limited power of appointment over the trust.
B. will be included in W's gross estate at her death because she was
entitled to receive distributions from trust principal for her health and
support.
C. will not be included in W's gross estate at her death because a QTIP
election was made.
D. will be included in W's estate because a QTIP election was made. -
ANSWER ✔ D. will be included in W's estate because a QTIP
election was made.
17.The duration of a life estate is BEST described as which of the following?
A. A fixed term
B. A life or the lives of one or more persons
C. Potentially infinite
GUIDE 2026 COMPLETE QUESTIONS WITH
CORRECT DETAILED ANSWERS ||
100% GUARANTEED PASS
<RECENT VERSION>
1. Bonds that can be traded for stock are known as - ANSWER ✔ Convertible
Bonds
2. A company most likely will call bonds (assuming bonds are callable) it had
previously issued if what occurs? - ANSWER ✔ Interest Rates Fall
3. The LOWESTS&P's rating that would qualify as investment grade is what? -
ANSWER ✔ BBB-
4. A treasury bill is taxable by which of the following entities? - ANSWER ✔
Higher liquidity and higher marketability
5. You manage a trust that holds zero-coupon bonds. To determine the tax
liability, you should do what? - ANSWER ✔ Report the annual accrual each
year.
6. If investors expect interest rates to increase they will do what? - ANSWER
✔ Decrease Duration
,7. A municipal bond issue secured by the income from a bridge or toll road is
called a: - ANSWER ✔ Revenue Bond Issue
8. Dividend distributions from mutual funds are: - ANSWER ✔ taxable as
ordinary income or qualified dividends depending on status
9. Open-end and closed-end investment companies differ in their - ANSWER
✔ capitalization.
10.Investment companies must issue financial statements to their shareholders:
- ANSWER ✔ semiannually.
11.The price an investor will pay today when purchasing an open-end
investment company is determined from - ANSWER ✔ today's closing
price.
12.Which of the following is NOT a requirement of a QTIP trust?
A. All net accounting income to be paid to the surviving spouse at least
annually.
B. Principal to be distributed at the trustee's discretion for the surviving
spouse's health, education, support, or maintenance.
C. The surviving spouse has the ability to require the trustee to convert
non-income producing assets to income productive assets.
D. The surviving spouse may be the only permissible distributee during
their lifetime. - ANSWER ✔ B. Principal to be distributed at the
trustee's discretion for the surviving spouse's health, education,
support, or maintenance.
,13.In a pro rata fractional formula, which trust is frozen during administration
prior to funding?
A. The marital trust
B. The residual trust
C. Neither, they must share the appreciation/depreciation.
D. Both the marital and residual trusts. - ANSWER ✔ C. Neither, they
must share the appreciation/depreciation.
14.Which of the following is MANDATORY to qualify the general power of
appointment (GPA) marital deduction trust?
A. Right to encroach upon corpus of the marital deduction share by
surviving spouse during lifetime.
B. Ultimate distribution to decedent's heirs.
C. All net accounting income paid at least annually to the surviving
spouse and surviving spouse is given either lifetime GPA or
testamentary GPA.
D. Surviving spouse has the right to make gifts from the marital
deduction share during lifetime. - ANSWER ✔ C. All net accounting
income paid at least annually to the surviving spouse and surviving
spouse is given either lifetime GPA or testamentary GPA.
15.Which of the following is NOT a characteristic of a qualified domestic trust
(QDT)?
A. At least one trustee must be a U.S. citizen or domestic corporation.
B. The executor of the donor's estate must irrevocably elect to have the
trust treated at a QDT.
C. The U.S. trustee must have the right to withhold federal estate taxes
from any principal distribution.
, D. Upon termination of the trust, the U.S. trustee must file a final
accounting with the IRS and a tax at the maximum estate tax rate of
the current fair market value of the trust assets shall be assessed. -
ANSWER ✔ D. Upon termination of the trust, the U.S. trustee must
file a final accounting with the IRS and a tax at the maximum estate
tax rate of the current fair market value of the trust assets shall be
assessed.
16.H's will creates a QTIP marital trust for the benefit of W. The trust provides
that W will receive all of the trust income, and will receive trust principal for
her health and support. W has a limited power of appointment over the trust.
Bank X is designated to serve as the sole trustee. At W's death, any income
or principal she received from the trust will be included in her gross estate.
H's executor will make a QTIP election for this trust on H's federal estate tax
return. The marital trust:
A. will be included in W's gross estate at her death because W had a
limited power of appointment over the trust.
B. will be included in W's gross estate at her death because she was
entitled to receive distributions from trust principal for her health and
support.
C. will not be included in W's gross estate at her death because a QTIP
election was made.
D. will be included in W's estate because a QTIP election was made. -
ANSWER ✔ D. will be included in W's estate because a QTIP
election was made.
17.The duration of a life estate is BEST described as which of the following?
A. A fixed term
B. A life or the lives of one or more persons
C. Potentially infinite
