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Certified Financial Planner Flashcards

7 cards from real CFP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Certified Financial Planner flashcards as text

  1. A couple has $1.2 million in combined estate assets in 2024. Which estate planning tool most efficiently utilizes both spouses' federal estate tax exemptions?

    Answer: Bypass trust (credit shelter trust)

    A bypass trust funds up to the deceased spouse's exemption amount, sheltering it from estate tax at the surviving spouse's death and utilizing both exemptions.

  2. What is the wash-sale rule's primary impact on tax-loss harvesting strategies?

    Answer: Disallows the loss if a substantially identical security is purchased within 30 days before or after the sale

    The wash-sale rule disallows the claimed loss if a substantially identical security is bought within 30 days before or after the sale, deferring the loss to the replacement shares.

  3. Which life insurance policy type offers permanent coverage with a fixed premium, guaranteed death benefit, and no cash value investment risk to the policyholder?

    Answer: Whole life insurance

    Whole life insurance provides a guaranteed death benefit, fixed premiums, and guaranteed cash value growth with no market risk transferred to the policyholder.

  4. A self-employed client earns $200,000 net profit in 2024. What is the maximum contribution to a Solo 401(k) plan (ignoring catch-up)?

    Answer: $69,000

    The 2024 Solo 401(k) limit is $69,000, combining up to $23,000 in employee deferrals plus up to 25% of net self-employment income as employer contributions.

  5. In portfolio theory, which measure indicates the proportion of a portfolio's total risk that is attributable to market (systematic) risk?

    Answer: R-squared (R²)

    R-squared measures the percentage of a portfolio's variance explained by a benchmark, indicating how much of total risk is systematic market risk.

  6. Which education funding strategy allows tax-free growth and withdrawals for qualified education expenses while also permitting rollovers to a Roth IRA starting in 2024?

    Answer: 529 college savings plan

    The SECURE 2.0 Act allows unused 529 plan funds to be rolled over to a Roth IRA for the beneficiary, subject to lifetime limits and annual contribution caps.

  7. A client owns a rental property with a $300,000 adjusted basis and $80,000 in accumulated depreciation. If sold for $450,000, what is the tax treatment of the depreciation?

    Answer: Recaptured as ordinary income at a maximum 25% rate

    Section 1250 unrecaptured depreciation on real property is taxed as ordinary income at a maximum rate of 25%, separate from the remaining capital gain.