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CERTIFIED FINANCIAL PLANNER™ certification exam (CFP Board) · CFP® Certification Examination

CFP CFP Tax Planning: practice questions with answers

6 free exam-style questions on Tax Planning for CFP CFP CFP® Certification Examination. Try each one, then open the answer to read the explanation. Fincora has 84 original questions on this syllabus area.

Question 1

Damon's wife died in March 2025, and he filed a joint return with her for 2025. He has not remarried. Throughout 2026 his 9-year-old son, whom he claims as a dependent, lived with him in a home whose entire upkeep Damon paid. Which filing status gives Damon the most favorable 2026 brackets and standard deduction?

  1. A Single
  2. B Head of household
  3. C Married filing jointly
  4. D Qualifying surviving spouse
Show the answer

Answer: D. Under IRC §2(a) a taxpayer whose spouse died in one of the two preceding tax years, who has not remarried and who pays more than half the cost of a home that is the main home of a dependent child for the whole year, may file as a qualifying surviving spouse. Damon's wife died in 2025, so he can use this status for 2026 and 2027. It uses the married-filing-jointly brackets and the MFJ standard deduction ($32,200 for 2026), which beat head of household ($24,150) and single ($16,100). A joint return itself is available only for the year of death (2025).

Question 2

Radomir owns 60% of an S corporation and works in the business as an employee. In 2026 the corporation pays $14,000 of health insurance premiums for Radomir and his family under a plan it maintains for its employees. Radomir is not eligible for any other employer-subsidized plan. How are the premiums treated for federal income tax?

  1. A Included in Radomir's W-2 wages, with an above-the-line deduction for him as self-employed health insurance
  2. B Excluded from Radomir's income as a tax-free employer fringe benefit, the same as for any other employee
  3. C Treated as a nondeductible distribution to Radomir that reduces his basis in his S corporation stock
  4. D Included in Radomir's W-2 wages, with relief only as an itemized medical deduction above 7.5% of AGI
Show the answer

Answer: A. Under IRC §1372 a more-than-2% S corporation shareholder is treated like a partner for fringe benefit purposes. Health insurance premiums the corporation pays for such a shareholder are deductible by the corporation and included in the shareholder's W-2 wages (box 1; they are not subject to Social Security and Medicare tax when paid under a plan for employees). The shareholder may then deduct them above the line as self-employed health insurance under §162(l), provided he is not eligible for another subsidized employer plan (Rev. Rul. 91-26; Notice 2008-1).

Question 3

A trust's 2026 DNI is $60,000: $45,000 of taxable interest and $15,000 of tax-exempt municipal bond interest, with no expenses. The trustee distributes $30,000 to the sole beneficiary. How much taxable income does the beneficiary report from the distribution?

  1. A $15,000
  2. B $22,500
  3. C $30,000
  4. D $45,000
Show the answer

Answer: B. Amounts distributed carry out the same proportion of each class of income that makes up DNI (IRC §662(b)).

Taxable share of DNI = $45,000 / $60,000 = 75%
Taxable to beneficiary = 75% x $30,000 = $22,500; the other $7,500 is tax-exempt interest.
The trust's distribution deduction excludes the tax-exempt part (§661(c)), so it deducts $22,500.

Question 4

For 2026 Yannick, a single filer, has short-term capital gains of $4,000, short-term capital losses of $15,000, long-term capital gains of $9,000 and long-term capital losses of $2,000. He has no capital loss carryovers. What is the result on his 2026 return?

  1. A A $3,000 deduction against ordinary income and a $1,000 short-term loss carryover
  2. B A $3,000 deduction against ordinary income and a $1,000 long-term loss carryover
  3. C A $4,000 deduction against ordinary income and no loss carried to 2027
  4. D A $3,000 deduction against ordinary income and an $8,000 short-term loss carryover
Show the answer

Answer: A. 1. Net short-term: $4,000 - $15,000 = -$11,000
2. Net long-term: $9,000 - $2,000 = +$7,000
3. Net the two: -$11,000 + $7,000 = -$4,000, a net short-term capital loss
4. Deduct $3,000 against ordinary income (IRC §1211(b)); carry $1,000 forward indefinitely as a short-term loss (IRC §1212(b)).

Question 5

Dagny is a limited partner in an equipment-leasing partnership. She contributed $40,000 cash, and her share of the partnership's nonrecourse equipment loan, for which no partner is personally liable, is $60,000. Her share of the partnership's 2026 loss is $70,000. Before the passive activity rules are applied, how much of the loss do the at-risk rules allow?

  1. A $0
  2. B $30,000
  3. C $40,000
  4. D $70,000
Show the answer

Answer: C. Losses pass three tests in order: basis, then at-risk (IRC §465), then passive activity (IRC §469).

- Basis = $40,000 + $60,000 share of liabilities = $100,000, so basis allows the full $70,000.
- At risk = cash and property contributed plus debt for which she is personally liable. Nonrecourse debt is not at risk (the exception for qualified nonrecourse financing applies only to real estate). At risk = $40,000.
- Allowed under at-risk: $40,000; $30,000 is suspended until she has more at risk.

The $40,000 then faces the passive activity rules, since a limited partner's interest is generally passive.

Question 6

Agnieszka Kowalski and her husband separated in March 2026, when he moved out; they are not divorced or legally separated, and he refuses to file a joint return. Their 8-year-old daughter lived with Agnieszka for all of 2026 and is her dependent, and Agnieszka paid more than half the cost of keeping up their home. Which filing status gives her the lowest 2026 federal income tax?

  1. A Married filing separately
  2. B Single
  3. C Head of household
  4. D Qualifying surviving spouse
Show the answer

Answer: C. Marital status is determined on December 31. A married taxpayer is considered unmarried (IRC §7703(b)) and may file as head of household if:

- she files a separate return,
- she paid more than half the cost of keeping up her home for the year,
- her spouse did not live in the home during the last 6 months of the year, and
- the home was the main home of her child (whom she can claim as a dependent) for more than half the year.

Agnieszka meets every test. HOH gives a larger standard deduction ($24,150 v. $16,100 for MFS in 2026) and wider brackets than married filing separately.

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