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Ultimate Guide to the REG Section: CPA Exam Blueprint and Study Resources

Area I - Ethics, Professional Responsibilities and Federal Tax Procedures (10-20%)

Skill
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
A. Ethics and responsibilities in tax practice
1. Regulations governing practice before the Internal Revenue Service Recall the regulations governing practice before the Internal Revenue Service.
Apply the regulations governing practice before the Internal Revenue Service given a specific scenario.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
2. Internal Revenue Code and Regulations related to tax return preparers Recall who is a tax return preparer.
Recall situations that would result in tax return preparer penalties.
Apply potential tax return preparer penalties given a specific scenario.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
B. Licensing and disciplinary systems
Understand and explain the role and authority of state boards of accountancy.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
C. Federal tax procedures
1. Audits, appeals and the judicial process Explain the audit and appeals process as it relates to tax matters.
Explain the different levels of the judicial process as they relate to tax matters.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
2. Substantiation and disclosure Summarize the requirements for the appropriate disclosure of a tax return position.
Recall requirements to report foreign bank accounts.
Identify situations in which disclosure of tax return positions is required.
Identify whether substantiation is sufficient given a specific scenario.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
3. Taxpayer penalties Recall situations that would result in taxpayer penalties relating to tax returns.
Identify taxpayer penalties given a specific scenario.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
4. Authoritative hierarchy Recall the appropriate hierarchy of authority for tax purposes.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
D. Legal duties and responsibilities
1. Common law duties and liabilities to clients and third parties Summarize the tax return preparer’s common law duties and liabilities to clients and third parties.
Identify situations which result in violations of the tax return preparer’s common law duties and liabilities to clients and third parties.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
2. Privileged communications, confidentiality and privacy acts Summarize the rules regarding privileged communications as they relate to tax practice.
Identify situations in which communications regarding tax practice are considered privileged.

Area II - Business Law (15-25%)

Skill
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
A. Agency
1. Authority of agents and principals Recall the types of agent authority.
Identify whether an agency relationship exists given a specific scenario.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
2. Duties and liabilities of agents and principals Explain the various duties and liabilities of agents and principals.
Identify the duty or liability of an agent or principal given a specific scenario.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
B. Contracts
1. Formation Summarize the elements of contract formation between parties.
Identify whether a valid contract was formed given a specific scenario.
Identify different types of contracts (e.g., written, verbal, unilateral, express, implied) given a specific scenario.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
2. Performance and discharge Explain the rules related to the fulfillment of performance obligations necessary for an executed contract.
Explain the different ways in which a contract can be discharged (e.g. performance, agreement, and operation of the law).
Identify whether a contract has been discharged given a specific scenario.
Identify whether both parties to a contract have fulfilled their performance obligation given a specific scenario.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
3. Breach and remedies Summarize the different remedies available to a party for breach of contract.
Identify situations involving breach of contract given a specific scenario.
Identify the remedy available to a party for breach of contract given a specific scenario.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
C. Debtor-creditor relationships
Explain the rights, duties and liabilities of debtors, creditors and guarantors.
Explain the rights of debtors and creditors and how property is distributed in bankruptcy proceedings.
Explain the difference between a secured and unsecured creditor and the requirements needed to perfect a security interest.
Identify rights, duties or liabilities of debtors, creditors or guarantors given a specific scenario.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
D. Federal laws and regulations (employment tax, qualified health plans, bankruptcy, worker classifications and anti-bribery)
Summarize the federal laws and regulations for qualified health care plans, including required business mandates and premium tax credits.
Explain the federal laws and regulations related to employment taxes from both an employer and employee perspective.
Recall the factors used to determine classification of an employee versus an independent contractor.
Recall the types of bankruptcy and the requirements for discharge of indebtedness.
Summarize the federal laws and regulations prohibiting bribery of foreign government officials, including payments made to generate preferential treatment from a foreign government.
Identify compliance issues with various federal laws and regulations (employment tax, qualified health plans, bankruptcy, worker classifications and anti-bribery) given a specific scenario.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
E. Business structure
1. Selection and formation of business entity and related operation and termination Summarize the processes for formation and termination of various business entities.
Summarize the legal characteristics of various business entities.
2. Rights, duties, legal obligations and authority of owners and management Summarize the rights, duties, legal obligations and authority of owners and management.
Identify the rights, duties, legal obligations and authority of owners and management given a specific scenario.

Area III - Federal Taxation of Property Transactions (5-15%)

Skill
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
A. Basis of assets
Calculate the tax basis of an asset purchased for use in a trade or business.
Calculate the tax basis of an asset converted from personal to business use.
Calculate the tax basis of property received as a gift or as an inheritance from a decedent.
Calculate the tax basis of stock acquired through a wash sale.
Calculate the basis of intangible assets, including organization costs, start-up costs and loan costs.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
B. Cost recovery (depreciation and amortization)
Calculate tax depreciation for tangible business property using MACRS, including identification of the applicable recovery period and convention.
Determine property eligible for a Section 179 deduction.
Calculate tax amortization for intangible assets.
Review a tax depreciation and amortization schedule for the current year and supporting documentation, including any source data used to create the schedule, to determine the completeness and accuracy of the expense amounts deducted for tax purposes.
Review and resolve discrepancies identified by automated diagnostic and validation checks to ensure the completeness and accuracy of the depreciation and amortization expense reported on a tax return based on the source data used to prepare the return.

Area IV - Federal Taxation of Individuals (22-32%)

Skill
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
A. Gross income (inclusions and exclusions)
Calculate the amounts that should be included in an individual’s gross income as reported on Form 1040 – U.S. Individual Income Tax Return, including wages, interest and dividends, guaranteed payments received from a partnership, fringe benefits, income from a qualified retirement plan and punitive damages.
Calculate the capital gain that should be included in an individual’s gross income as reported on Form 1040 – U.S. Individual Income Tax Return from transactions, including gains from the sale of investments or virtual currencies, assets received as gifts and assets received from a decedent and classify them as long-term or short-term.
Calculate the amounts that should be excluded from an individual’s gross income as reported on Form 1040 – U.S. Individual Income Tax Return, including tax-exempt interest, gifts received and life insurance proceeds.
Calculate the income reported in the year of death for a decedent on Form 1040 – U.S. Individual Income Tax Return.
Review Form 1040 – U.S. Individual Income Tax Return and supporting documentation, including any source data used to create the return, to determine the completeness and accuracy of the gross income reported.
Review and resolve discrepancies identified by automated diagnostic and validation checks to ensure the completeness and accuracy of the gross income reported on Form 1040 – U.S. Individual Income Tax Return based on the source data used to prepare the form.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
B. Reporting of items from pass-through entities
Use information provided from disregarded and pass-through entities in which an individual has an ownership interest to report an owner’s share of ordinary business income (loss) and separately stated items on an individual’s tax return.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
C. Adjustments and deductions to arrive at adjusted gross income and taxable income
Identify adjustments allowed in the calculation of adjusted gross income given a specific scenario, including a contribution to a qualified retirement plan, contribution to a health savings plan and self-employment expenses.
Identify itemized deductions allowed in the calculation of taxable income given a specific scenario, including medical expenses, qualified residence interest expense, casualty losses, taxes and charitable contributions.
Calculate the qualifying business income (QBI) deduction for federal income tax purposes.
Review Form 1040 – U.S. Individual Income Tax Return and supporting documentation, including any source data used to create the return, to determine the accuracy of the adjusted gross income and taxable income reported.
Review and resolve discrepancies identified by automated diagnostic and validation checks to ensure the completeness and accuracy of the adjusted gross income and taxable income reported on Form 1040 – U.S. Individual Income Tax Return based on the source data used to prepare the form.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
D. Loss limitations
Calculate the net tax loss allowed on the sale of capital property, including netting of capital gains and losses and capital loss carryforwards.
Calculate the amount of ordinary business loss allowed for an individual materially participating in the operations of a pass-through entity with sufficient basis in the entity.
Calculate losses disallowed for tax purposes, such as from a hobby, wash sale or sale of a personal-use asset.
Review Form 1040 – U.S. Individual Income Tax Return and supporting documentation, including any source data used to create the return, to determine the accuracy of the losses reported.
Review and resolve discrepancies identified by automated diagnostic and validation checks to ensure the completeness and accuracy of the loss limitations reported on Form 1040 – U.S. Individual Income Tax Return based on the source data used to prepare the form.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
E. Filing status
Recall taxpayer filing status for tax purposes.
Recall relationships meeting the definition of dependent for purposes of determining taxpayer filing status.
Identify taxpayer filing status for tax purposes given a specific scenario.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
F. Computation of tax and credits
Recall and define the difference between a refundable and nonrefundable tax credit.
Recall and define the safe harbor requirements for individual estimated tax payments to avoid penalties.
Calculate the tax liability based on an individual’s taxable income given a specific scenario, including consideration of the net investment income tax.

Area V - Federal Taxation of Entities (including tax preparation) (23-33%)

Skill
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
A. Differences between book and tax income (loss)
Identify permanent vs. temporary differences to be reported on Schedule M-3 in a given scenario.
Calculate the book/tax differences to be reported on a Schedule M-1 or M-3.
Review an entity’s adjusted book trial balance and supporting documentation to identify and calculate possible book/tax differences.
Review a C corporation’s adjusted book trial balance and supporting documentation, including relevant source data used to create the trial balance, to determine the completeness and accuracy of the book/tax differences reported on Form 1120 – U.S. Corporation Income Tax Return.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
B. C corporations
1. Computations of taxable income, tax liability and allowable credits Calculate taxable income for a C corporation.
Calculate the current-year net operating or capital loss of a C corporation, and the limitations on use in the current year.
Calculate the credits allowable as a reduction to tax for a C corporation.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
2. State and local tax issues Define the general concept and rationale of nexus with respect to state and local taxation.
Define the general concept and rationale of apportionment and allocation with respect to state and local taxation.
Calculate state taxable income using the applicable apportionment factors given a specific scenario.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
C. S corporations
1. Eligibility and election Recall eligible shareholders for an S corporation for tax purposes
Recall S corporation eligibility requirements for tax purposes.
Identify situations in which S corporation status would be revoked or terminated for tax purposes.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
2. Determination of ordinary business income (loss) and separately stated items Calculate ordinary business income (loss) and separately stated items for an S corporation for tax purposes.
Calculate the impact of current year operations on an S corporation’s accumulated adjustments account.
Review federal Form 1120S – U.S. Income Tax Return for an S Corporation and supporting documentation, including any source data used to create the return, to determine the completeness and accuracy of the classification of items as ordinary business income (loss), separately stated or nondeductible.
Review and resolve discrepancies identified by automated diagnostic and validation checks to ensure the completeness and accuracy of the ordinary business income (loss) and separately stated items reported on Form 1120S – U.S. Income Tax Return for an S Corporation based on the source data used to prepare the form.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
3. Basis of shareholder’s interest Calculate a shareholder’s stock basis in an S corporation for tax purposes resulting from business operations, cash contributions by the shareholder and cash distributions to the shareholder.
Calculate changes in a shareholder’s debt basis in an S corporation resulting from current year repayment of debt.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
D. Partnerships
1. Determination of ordinary business income (loss) and separately stated items Review federal Form 1065 – U.S. Return of Partnership Income and supporting documentation, including any source data used to create the return, to determine the completeness and accuracy of the classification of items as ordinary business income (loss), separately stated or nondeductible.
Review federal Form 1065 – U.S. Return of Partnership Income and supporting documentation, including any source data used to create the return, to determine the completeness and accuracy of the classification of items as ordinary business income (loss), separately stated or nondeductible.
Review and resolve discrepancies identified by automated diagnostic and validation checks to ensure the completeness and accuracy of ordinary business income (loss) and separately stated items reported on Form 1065 – U.S. Return of Partnership Income based on the source data used to prepare the form.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
2. Basis of partner’s interest Calculate the partner’s basis in a partnership for tax purposes resulting from business operations, cash contributions by a partner, cash distributions to a partner and changes in existing partnership liabilities.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
E. Limited liability companies
Recall the tax classification options for a limited liability company for tax purposes.
Content group/topic Remembering & Understanding Application Analysis Evaluation Representative Task
F. Tax-exempt organizations
Recall the different types of tax-exempt organizations for tax purposes.