CRPC Practice Exam 2 EXAM LATEST 2024-
2025 ACTUAL EXAM QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) |ALREADY GRADED A+
Which one of the following cannot achieve the estate planning goal of providing for
incapacity?
A) trust
B) disability insurance
C) durable power of attorney
D) will - CORRECT ANSWER --D
A durable power of attorney and a trust can be used to manage the financial affairs of
an incompetent person. Disability insurance can be used to replace income when an
incapacitated person is no longer able to work. Because a will is only effective at death,
it cannot be used for incapacity planning.
Annette, a single taxpayer, has lived in her principal residence for 18 months, and is
relocating to another part of the country due to health reasons. She will have a gain of
$400,000 on the sale.
Which one of the following is correct with respect to the sale of her home?
A) She will qualify for an exclusion of $300,000 ($400,000 gain times 18/24).
B) She will qualify for an exclusion of $187,500 ($250,000 maximum exclusion times
18/24) on the sale of the home.
C)She will qualify for an exclusion of $400,000, because the two-year rule is waived if
the move is due to health reasons.
D) She will qualify for no exclusion because she did not use the home as the principal
residence for two of the last five years. - CORRECT ANSWER --B
The general rule is that a single person may exclude up to $250,000 in the sale of the
home, provided the home has been used as the principal residence for two of the
previous five years. A partial exclusion is available if the two-year rule is not met due to
health, job, or other unforeseen circumstances. The exclusion is the percentage of the
two-year period that the principal residence test is met, times the full exclusion amount.
Which of the following statements comparing the suitability standard and the fiduciary
standard is correct?
A) The suitability standard and the fiduciary standard are essentially the same thing.
B) Both approaches require looking out for the best interest of the client.
C) Verbal disclosure may be adequate under the suitability standard but not the
fiduciary standard.
,D) Both standards are primarily solution-driven rather than product-driven. - CORRECT
ANSWER --C
The suitability standard is often product-driven (is the product suitable?) whereas the
fiduciary standard is solution-driven (what is in the best interest of the client?). The
fiduciary standard is a higher standard and requires written disclosure, whereas in
certain circumstances verbal disclosure may be adequate under the suitability standard.
Roberto and Julia, a married couple with two young children and minimal assets, are
considering creating an estate plan. Which one of the following statements is correct? -
CORRECT ANSWER --They should create an estate plan even though their assets
do not exceed the applicable exclusion amount.
There are many nontax reasons for developing an estate plan, such as planning to meet
the needs of their dependent children, proper distribution of assets, and efficient transfer
of assets at death.
Owning property in joint tenancy with right of survivorship (JTWROS) is a will substitute
because - CORRECT ANSWER --the property passes outside of probate.
It is precisely because JTWROS does pass property outside of probate that it is a will
substitute. While a true statement, the fact that JTWROS property may be owned by
more than two owners does not make it a will substitute and therefore not subject to
probate.
When thinking about a tax-diversified overall portfolio, when is the proper time to take
distributions from an after-tax investment like a Roth IRA or a taxable brokerage
account to fund living expenses in retirement?
A) when investments had recently had large gains
B) when taxable income was low
C) when investments were down sharply
D) when the market was experiencing average performance - CORRECT ANSWER --
C when investments were down sharply
Tax diversification can help a client avoid selling portfolio assets at a loss. The point is
that a client lives on after-tax income in retirement. Thus, she would have to sell enough
shares of a taxable investment to pay the income taxes and also have the money to live
on. If she pulled the money out of an after-tax investment like a Roth account or a
regular brokerage account that did not have a large gain, the withdrawal amount during
poor investment returns is reduced. The lower withdrawals should help the portfolio last
longer in retirement.
Which of the following are true statements about the level of trust in the financial
services industry according to different major studies?
I. The trust level of elites has recovered from the lows of the Great Recession, but the
mass population's trust level is still low and has not recovered as much as it has for the
affluent.
, II. Just over 50% of executives at financial firms feel the need for flexible ethics to get
ahead at their firms.
III. Trust comes far below expertise in the eyes of prospects when they are looking for
an adviser.
IV. The financial services industry enjoys a high level of trust in comparison to most
other industries when rated by the American public. - CORRECT ANSWER -- I & II
According to different the Edelman Trust Barometer, the trust level for the affluent has
mostly recovered from the Great Recession, but the level of trust for the rest of the
population is far lower. Also, 53% of executives reported to the CFA Institute that their
career progression would be hindered if they were not flexible in their ethics. On the
other side, no one has felt thankful after dealing with a financial services person whose
"flexible ethics" misled them. Stories about this and other ethical lapses have led to the
financial services industry receiving low marks in trustworthiness.
The donee's basis in gifted property is determined by which of the following valuations?
I. the property's fair market value (FMV) at the time of the gift if the property has
appreciated in value while owned by the donor
II. the donor's adjusted basis in the property at the time of the gift if the property has
appreciated in value while owned by the donor
III. the property's FMV six months after the gift if not sold prior to that time
IV. the property's FMV at the time of the gift if this value is less than the donor's
adjusted basis, and the property is sold for a loss - CORRECT ANSWER -- II & IV
Option I would constitute a step-up in basis, which can only be obtained at death.
Option III is incorrect as the donee's basis is determined by circumstances that exist at
the time of completion of the gift, not six months afterward.
Which one of the following is correct about forces changing the financial services
industry?
A) in general, money management firms are getting smaller and more niche
B) the American public has little trouble differentiating between the various credentials
held by people in financial services
C) technical specialists are harder to supervise
D) in the 1990s, major investment firms started shifting their capital structure toward the
firm's owners taking larger and larger participation in investment losses and gains -
CORRECT ANSWER --C
Senior management has experienced a more and more difficult time supervising highly
technical specialists who engage in complicated financial engineering strategies.
Which of the following are key obligations a broker-dealer must meet to satisfy
Regulation Best Interest?
I. act in accordance with the fiduciary standard
II. exercise "reasonable diligence, care, and skill" when recommending transactions
III. make "fair and considerate" disclosure of material facts regarding the investment at
or before the making of a recommendation to an institutional client
2025 ACTUAL EXAM QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) |ALREADY GRADED A+
Which one of the following cannot achieve the estate planning goal of providing for
incapacity?
A) trust
B) disability insurance
C) durable power of attorney
D) will - CORRECT ANSWER --D
A durable power of attorney and a trust can be used to manage the financial affairs of
an incompetent person. Disability insurance can be used to replace income when an
incapacitated person is no longer able to work. Because a will is only effective at death,
it cannot be used for incapacity planning.
Annette, a single taxpayer, has lived in her principal residence for 18 months, and is
relocating to another part of the country due to health reasons. She will have a gain of
$400,000 on the sale.
Which one of the following is correct with respect to the sale of her home?
A) She will qualify for an exclusion of $300,000 ($400,000 gain times 18/24).
B) She will qualify for an exclusion of $187,500 ($250,000 maximum exclusion times
18/24) on the sale of the home.
C)She will qualify for an exclusion of $400,000, because the two-year rule is waived if
the move is due to health reasons.
D) She will qualify for no exclusion because she did not use the home as the principal
residence for two of the last five years. - CORRECT ANSWER --B
The general rule is that a single person may exclude up to $250,000 in the sale of the
home, provided the home has been used as the principal residence for two of the
previous five years. A partial exclusion is available if the two-year rule is not met due to
health, job, or other unforeseen circumstances. The exclusion is the percentage of the
two-year period that the principal residence test is met, times the full exclusion amount.
Which of the following statements comparing the suitability standard and the fiduciary
standard is correct?
A) The suitability standard and the fiduciary standard are essentially the same thing.
B) Both approaches require looking out for the best interest of the client.
C) Verbal disclosure may be adequate under the suitability standard but not the
fiduciary standard.
,D) Both standards are primarily solution-driven rather than product-driven. - CORRECT
ANSWER --C
The suitability standard is often product-driven (is the product suitable?) whereas the
fiduciary standard is solution-driven (what is in the best interest of the client?). The
fiduciary standard is a higher standard and requires written disclosure, whereas in
certain circumstances verbal disclosure may be adequate under the suitability standard.
Roberto and Julia, a married couple with two young children and minimal assets, are
considering creating an estate plan. Which one of the following statements is correct? -
CORRECT ANSWER --They should create an estate plan even though their assets
do not exceed the applicable exclusion amount.
There are many nontax reasons for developing an estate plan, such as planning to meet
the needs of their dependent children, proper distribution of assets, and efficient transfer
of assets at death.
Owning property in joint tenancy with right of survivorship (JTWROS) is a will substitute
because - CORRECT ANSWER --the property passes outside of probate.
It is precisely because JTWROS does pass property outside of probate that it is a will
substitute. While a true statement, the fact that JTWROS property may be owned by
more than two owners does not make it a will substitute and therefore not subject to
probate.
When thinking about a tax-diversified overall portfolio, when is the proper time to take
distributions from an after-tax investment like a Roth IRA or a taxable brokerage
account to fund living expenses in retirement?
A) when investments had recently had large gains
B) when taxable income was low
C) when investments were down sharply
D) when the market was experiencing average performance - CORRECT ANSWER --
C when investments were down sharply
Tax diversification can help a client avoid selling portfolio assets at a loss. The point is
that a client lives on after-tax income in retirement. Thus, she would have to sell enough
shares of a taxable investment to pay the income taxes and also have the money to live
on. If she pulled the money out of an after-tax investment like a Roth account or a
regular brokerage account that did not have a large gain, the withdrawal amount during
poor investment returns is reduced. The lower withdrawals should help the portfolio last
longer in retirement.
Which of the following are true statements about the level of trust in the financial
services industry according to different major studies?
I. The trust level of elites has recovered from the lows of the Great Recession, but the
mass population's trust level is still low and has not recovered as much as it has for the
affluent.
, II. Just over 50% of executives at financial firms feel the need for flexible ethics to get
ahead at their firms.
III. Trust comes far below expertise in the eyes of prospects when they are looking for
an adviser.
IV. The financial services industry enjoys a high level of trust in comparison to most
other industries when rated by the American public. - CORRECT ANSWER -- I & II
According to different the Edelman Trust Barometer, the trust level for the affluent has
mostly recovered from the Great Recession, but the level of trust for the rest of the
population is far lower. Also, 53% of executives reported to the CFA Institute that their
career progression would be hindered if they were not flexible in their ethics. On the
other side, no one has felt thankful after dealing with a financial services person whose
"flexible ethics" misled them. Stories about this and other ethical lapses have led to the
financial services industry receiving low marks in trustworthiness.
The donee's basis in gifted property is determined by which of the following valuations?
I. the property's fair market value (FMV) at the time of the gift if the property has
appreciated in value while owned by the donor
II. the donor's adjusted basis in the property at the time of the gift if the property has
appreciated in value while owned by the donor
III. the property's FMV six months after the gift if not sold prior to that time
IV. the property's FMV at the time of the gift if this value is less than the donor's
adjusted basis, and the property is sold for a loss - CORRECT ANSWER -- II & IV
Option I would constitute a step-up in basis, which can only be obtained at death.
Option III is incorrect as the donee's basis is determined by circumstances that exist at
the time of completion of the gift, not six months afterward.
Which one of the following is correct about forces changing the financial services
industry?
A) in general, money management firms are getting smaller and more niche
B) the American public has little trouble differentiating between the various credentials
held by people in financial services
C) technical specialists are harder to supervise
D) in the 1990s, major investment firms started shifting their capital structure toward the
firm's owners taking larger and larger participation in investment losses and gains -
CORRECT ANSWER --C
Senior management has experienced a more and more difficult time supervising highly
technical specialists who engage in complicated financial engineering strategies.
Which of the following are key obligations a broker-dealer must meet to satisfy
Regulation Best Interest?
I. act in accordance with the fiduciary standard
II. exercise "reasonable diligence, care, and skill" when recommending transactions
III. make "fair and considerate" disclosure of material facts regarding the investment at
or before the making of a recommendation to an institutional client
