CPA REG Study Guide - Regulation

Complete study guide for the CPA REG exam. Covers federal taxation, business law, ethics, and professional responsibilities.

Flashcards

300

Mini Exams

Full Exams

Format

72 MCQs + 8 TBS

REG Exam Overview

The REG section covers federal taxation, business law, and professional ethics. It includes 72 multiple-choice questions and 8 task-based simulations across four testlets. You have 4 hours. The passing score is 75. About 60-65% of REG is taxation and 35-40% is business law and ethics. Many candidates find REG challenging due to the volume of tax rules to memorize.

Individual Taxation

Individual tax is the largest REG topic. Master filing status, gross income inclusions and exclusions, adjustments to AGI (above-the-line deductions), standard vs. itemized deductions, and tax credits. Key areas include Social Security taxation, capital gains and losses, passive activity rules, the qualified business income (QBI) deduction under Sec. 199A, and the alternative minimum tax (AMT).

Property Transactions

Property transactions are heavily tested. Study basis rules (cost, gifted, inherited), like-kind exchanges (Sec. 1031), involuntary conversions (Sec. 1033), installment sales, wash sales, and related-party rules (Secs. 267 and 1239). Depreciation recapture under Secs. 1245 and 1250 is critical. Know Sec. 121 (home sale exclusion) and how to characterize gains as ordinary, Sec. 1231, or capital.

Partnership & S Corporation Taxation

Entity taxation is complex. For partnerships, study formation (Sec. 721), basis calculations, guaranteed payments, distributions (current and liquidating), and the at-risk and passive activity loss limitations. For S corporations, study eligibility, elections, shareholder basis (including the loan basis rules), AAA, distributions, built-in gains tax, and the interaction with Sec. 199A.

C Corporation Taxation

C corporation topics include formation (Sec. 351), E&P calculations, dividend distributions and the dividends received deduction (DRD), stock redemptions (Sec. 302), complete and partial liquidations (Secs. 331, 332, 334), and tax-free reorganizations. Know the corporate tax rate, estimated tax rules, and the accumulated earnings tax and personal holding company tax.

Estate, Gift & Trust Taxation

Estate and gift tax covers the unified credit, annual exclusion, gift splitting, the gross estate, the taxable estate, marital and charitable deductions, QTIP elections, and the generation-skipping transfer tax. Trust taxation covers simple vs. complex trusts, distributable net income (DNI), and the taxation of beneficiaries. These topics are less heavily weighted but reliably tested.

Business Law

Business law covers about 35% of REG. Study agency (creation, authority, liability), contracts (formation, defenses, performance, remedies, Statute of Frauds), UCC Article 2 (sales of goods, warranties, risk of loss), debtor-creditor relationships (suretyship, Article 9 secured transactions), bankruptcy (Chapter 7, 11, 13), and federal securities regulation (Securities Act of 1933, Exchange Act of 1934).

Ethics & Professional Responsibilities

Ethics questions cover Treasury Circular 230 (who may practice, duties, sanctions), preparer penalties (Secs. 6694, 6695), tax return positions, and the duty of due diligence. Understand the rules for written advice, contingent fees, and return of client records. These topics are straightforward but worth easy points.

Study Tips for REG

Create a tax formula sheet and review it daily. Focus on individual and property transaction taxation first since they make up the largest portion. Practice basis calculation problems until they are automatic. For business law, focus on contracts and bankruptcy since they are the most heavily tested. Use mnemonics for lists of rules and exceptions.