CANNON CTFA STUDY GUIDE EXAM QUESTIONS AND
SOLUTIONS GRADED A+
✔✔Which of the following is NOT an accepted method of creating a QDOT?
A. by terms of trust or will
B. by the spouse within one (1) year of a decedent's death
C. initiated by spouse or executor and completed before a timely filing of the estate tax
return
D. by irrevocable assignment of interest to an arrangement which meets QDOT
requirements. - ✔✔B. by the spouse within one (1) year of a decedent's death
✔✔When the Federal Mid Term rate is 8%, what discount rate is used for determining
the present value of a future interest on a GRAT?
A. 10%
B. 9.6%
C. 8.0%
D. 6.67% - ✔✔B. 9.6%
✔✔A donor establishes a charitable remainder unitrust that will pay him 6% annually.
He funds it with a highly appreciated, valuable stock holding, purchased by his
grandfather. His income tax charitable deduction is which of the following?
A. Donor's cost basis up to 100% of the donor's adjusted gross income.
B. Fair market value less the actuarial value of his retained life interest, up to 60% of the
donor's adjusted gross income.
C. Fair market value less the actuarial value of his retained life interest, up to 30% of the
donor's adjusted gross income.
D. Fair market value up to 30% of the donor's adjusted gross income. - ✔✔C. Fair
market value less the actuarial value of his retained life interest, up to 30% of the
donor's adjusted gross income.
✔✔A clause which states "an amount equal to...should be placed in trust..." is an
example of which of the following?
A. pecuniary amount clause
B. fractional share clause
C. marital share
D. residuary share - ✔✔A. pecuniary amount clause
✔✔Which of the following is NOT required in 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 maintenance or support.
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 -
✔✔B. principal to be distributed at the trustee's discretion for the surviving spouse's
health, education maintenance or support.
✔✔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
distribution.
D. Upon termination of the trust, the U.S. trustee must file a final accounting with the
IRS and a tax of 55% of the current fair market value of the trust assets shall be
assessed. - ✔✔D. Upon termination of the trust, the U.S. trustee must file a final
accounting with the IRS and a tax of 55% of the current fair market value of the trust
assets shall be assessed.
✔✔Which of the following is an example of tangible personal property?
A. gold bar
B. common stock certificate
C. patent
D. vacant land - ✔✔A. gold bar
✔✔A life estate could be accompanied by which of the following?
I. a fee simple interest
II. a contingent remainder
A. Only I is true.
B. Only II is true.
C. Both I and II are true.
D. Neither I nor II is true. - ✔✔B. Only II is true.
✔✔Which of the following is NOT a characteristic of "tenancy-by-the-entirety"
ownership?
A. The only tenants are a married couple.
B. One-half is included in the estate of the first to die?
C. Either tenant may dispose of his or her interest without the consent of the other.
D. Some protection from each tenant's creditors is afforded. - ✔✔C. Either tenant may
dispose of his or her interest without the consent of the other.
, ✔✔Which of the following is LEAST likely to be used as a determinant in the
acceptance or declining of a new account?
A. The type of assets to be accepted
B. The document under which we will serve
C. The people involve as grantors and beneficiaries
D. The account load of the average administrative officer - ✔✔D. The account load of
the average administrative officer
✔✔Which of the following is not a qualifying event that permits conversion of a NICRUT
to a STANCRUT?
A. The trust beneficiary's 60th birthday
B. The sale of a parcel of real estate held in the trust
C. The grantor's investment advisor determines that a change in investment strategy is
desirable
D. All of the above are qualifying events - ✔✔C. The grantor's investment advisor
determines that a change in investment strategy is desirable
✔✔Which payment formula change is acceptable for a Charitable Remainder Trust with
a "Flip" provision?
A. CRAT to a CRUT
B. STANCRUT to a NIMCRUT
C. NIMCRUT to a CRAT
D. NICRUT to a STANCRUT - ✔✔D. NICRUT to a STANCRUT
✔✔A trust client creates a Charitable Remainder Unitrust that will pay 6% of the trust's
annual fair market value to the donor's son for the son for the son's life and then
terminate to a qualified charity. Which of the following factors will have an impact on the
value of the Charitable Remainder at trust inception?
1. The son's age
2. The donor's age
3. The IRC section 7520 interest rate for the month of trust funding
4. The timing of the payout to the son each year
A. All of the above factors will impact the value of the remainder interest
B. 1 and 2 only
C. 1, 3 and 4 only
D. 1 and 3 only - ✔✔C. 1, 3 and 4 only
✔✔For the following condition indicate the Equity Management Style that the following
characteristic would tend to represent on a relative basis.
Financial Sector
SOLUTIONS GRADED A+
✔✔Which of the following is NOT an accepted method of creating a QDOT?
A. by terms of trust or will
B. by the spouse within one (1) year of a decedent's death
C. initiated by spouse or executor and completed before a timely filing of the estate tax
return
D. by irrevocable assignment of interest to an arrangement which meets QDOT
requirements. - ✔✔B. by the spouse within one (1) year of a decedent's death
✔✔When the Federal Mid Term rate is 8%, what discount rate is used for determining
the present value of a future interest on a GRAT?
A. 10%
B. 9.6%
C. 8.0%
D. 6.67% - ✔✔B. 9.6%
✔✔A donor establishes a charitable remainder unitrust that will pay him 6% annually.
He funds it with a highly appreciated, valuable stock holding, purchased by his
grandfather. His income tax charitable deduction is which of the following?
A. Donor's cost basis up to 100% of the donor's adjusted gross income.
B. Fair market value less the actuarial value of his retained life interest, up to 60% of the
donor's adjusted gross income.
C. Fair market value less the actuarial value of his retained life interest, up to 30% of the
donor's adjusted gross income.
D. Fair market value up to 30% of the donor's adjusted gross income. - ✔✔C. Fair
market value less the actuarial value of his retained life interest, up to 30% of the
donor's adjusted gross income.
✔✔A clause which states "an amount equal to...should be placed in trust..." is an
example of which of the following?
A. pecuniary amount clause
B. fractional share clause
C. marital share
D. residuary share - ✔✔A. pecuniary amount clause
✔✔Which of the following is NOT required in 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 maintenance or support.
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 -
✔✔B. principal to be distributed at the trustee's discretion for the surviving spouse's
health, education maintenance or support.
✔✔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
distribution.
D. Upon termination of the trust, the U.S. trustee must file a final accounting with the
IRS and a tax of 55% of the current fair market value of the trust assets shall be
assessed. - ✔✔D. Upon termination of the trust, the U.S. trustee must file a final
accounting with the IRS and a tax of 55% of the current fair market value of the trust
assets shall be assessed.
✔✔Which of the following is an example of tangible personal property?
A. gold bar
B. common stock certificate
C. patent
D. vacant land - ✔✔A. gold bar
✔✔A life estate could be accompanied by which of the following?
I. a fee simple interest
II. a contingent remainder
A. Only I is true.
B. Only II is true.
C. Both I and II are true.
D. Neither I nor II is true. - ✔✔B. Only II is true.
✔✔Which of the following is NOT a characteristic of "tenancy-by-the-entirety"
ownership?
A. The only tenants are a married couple.
B. One-half is included in the estate of the first to die?
C. Either tenant may dispose of his or her interest without the consent of the other.
D. Some protection from each tenant's creditors is afforded. - ✔✔C. Either tenant may
dispose of his or her interest without the consent of the other.
, ✔✔Which of the following is LEAST likely to be used as a determinant in the
acceptance or declining of a new account?
A. The type of assets to be accepted
B. The document under which we will serve
C. The people involve as grantors and beneficiaries
D. The account load of the average administrative officer - ✔✔D. The account load of
the average administrative officer
✔✔Which of the following is not a qualifying event that permits conversion of a NICRUT
to a STANCRUT?
A. The trust beneficiary's 60th birthday
B. The sale of a parcel of real estate held in the trust
C. The grantor's investment advisor determines that a change in investment strategy is
desirable
D. All of the above are qualifying events - ✔✔C. The grantor's investment advisor
determines that a change in investment strategy is desirable
✔✔Which payment formula change is acceptable for a Charitable Remainder Trust with
a "Flip" provision?
A. CRAT to a CRUT
B. STANCRUT to a NIMCRUT
C. NIMCRUT to a CRAT
D. NICRUT to a STANCRUT - ✔✔D. NICRUT to a STANCRUT
✔✔A trust client creates a Charitable Remainder Unitrust that will pay 6% of the trust's
annual fair market value to the donor's son for the son for the son's life and then
terminate to a qualified charity. Which of the following factors will have an impact on the
value of the Charitable Remainder at trust inception?
1. The son's age
2. The donor's age
3. The IRC section 7520 interest rate for the month of trust funding
4. The timing of the payout to the son each year
A. All of the above factors will impact the value of the remainder interest
B. 1 and 2 only
C. 1, 3 and 4 only
D. 1 and 3 only - ✔✔C. 1, 3 and 4 only
✔✔For the following condition indicate the Equity Management Style that the following
characteristic would tend to represent on a relative basis.
Financial Sector
