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CPA Exam — Tax Compliance and Planning (TCP) Exam Cheat Sheet (2026)
A free, printable CPA Exam — Tax Compliance and Planning (TCP) exam cheat sheet: the 62 highest-yield points to know, grouped into 4 sections that follow the exam's content areas, each section with its published weight.
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- 62 of the 62 points carry a citation to the rule they come from.
- The real CPA Exam — Tax Compliance and Planning (TCP) exam: 240 minutes.
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- 112 free CPA Exam — Tax Compliance and Planning (TCP) practice questions on the same material, every one explained.
- Last updated: September 2026.
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Area I: Tax Compliance and Planning for Individuals and Personal Financial Planning
30–40% of the exam- ISO holding periods
- A sale is a qualifying disposition only if the shares are held at least two years from grant and one year from exercise. Otherwise the spread at exercise becomes compensation, capped at the gain realized.· IRC §422(a)(1), (c)(2)
- ISO spread under the AMT
- Section 421 does not apply for AMT purposes, so the spread at exercise is an AMT adjustment when the shares are held past the end of the year of exercise.· IRC §56(b)(3)
- Section 83(b) election
- An election filed within 30 days of the transfer taxes restricted property at its value when received. Later appreciation is then capital, and no deduction is allowed if the property is forfeited.· IRC §83(b)
- Gift loans of $100,000 or less
- Imputed interest is limited to the borrower's net investment income, and it is treated as zero if that income is $1,000 or less.· IRC §7872(d)(1)
- Individual estimated tax safe harbor
- Required payments are the lesser of 90% of the current-year tax or 100% of the prior-year tax. The prior-year figure rises to 110% when prior-year AGI exceeds $150,000.· IRC §6654(d)(1)
- Long-term capital gain property
- A gift to a public charity is deductible at fair market value, limited to 30% of the contribution base, and the excess carries forward five years.· IRC §170(b)(1)(C)
- Reduction for short-term property
- The deduction is reduced by the gain that would not be long-term capital gain if the property were sold, which limits short-term property to basis.· IRC §170(e)(1)(A)
- Health savings accounts
- A distribution not used for qualified medical expenses is included in income and incurs a 20% additional tax unless the holder is 65 or older, disabled or deceased.· IRC §223(f)(2), (f)(4)
- Wash sales
- A loss is disallowed when substantially identical stock is bought within 30 days before or after the sale, and the disallowed loss is added to the basis of the new shares.· IRC §1091(a), (d)
- Amount at risk
- Cash, the basis of property contributed and debt the taxpayer is personally liable for count as at risk. Nonrecourse debt counts only if it is qualified nonrecourse financing secured by real property.· IRC §465(b)
- Rental real estate allowance
- Up to $25,000 of losses from actively managed rentals may offset other income. The allowance is reduced by 50% of modified AGI above $100,000.· IRC §469(i)
- Material participation
- One test is participating in the activity for more than 500 hours during the year.· Temp. Treas. Reg. §1.469-5T(a)(1)
- Disposition of the entire interest
- A fully taxable sale to an unrelated person frees the suspended losses. A sale to a related person defers the release until that person sells to an outsider.· IRC §469(g)(1)
- Present-interest annual exclusion
- The annual exclusion applies only to gifts of present interests. Tuition paid directly to a school and medical costs paid directly to a provider are not gifts.· IRC §2503(b), (e)
- Gift splitting
- Spouses who are U.S. citizens or residents may elect to treat a gift to a third party as made one-half by each.· IRC §2513(a)
- Roth IRA qualified distributions
- A distribution is tax-free if it comes after age 59½, death or disability, and after the five-taxable-year period. Distributions come first from regular contributions.· IRC §408A(d)(2), (d)(4)
- Early distribution exceptions
- The age-55 separation-from-service exception applies to qualified plans but not to IRAs. Higher education expenses and first-time home purchases are exceptions only for IRAs.· IRC §72(t)(2)-(3)
- Life insurance and the estate
- Proceeds are included in the insured's gross estate if the insured held any incident of ownership at death.· IRC §2042(2)
Area II: Entity Tax Compliance
30–40% of the exam- NOL deduction limit
- For losses arising after 2017, the deduction is limited to 80% of taxable income before the NOL deduction. Losses arising after 2020 carry forward indefinitely, with no carryback for most corporations.· IRC §172(a)(2), (b)(1)(A)
- Corporate capital losses
- Capital losses offset only capital gains. A net capital loss is carried back three years and forward five years as a short-term loss.· IRC §1211(a), §1212(a)(1)
- Section 382 limitation
- After a more-than-50-percentage-point ownership change within the testing period, pre-change losses may offset only the old loss corporation's value times the long-term tax-exempt rate each year.· IRC §382(b), (g)
- Liabilities in excess of basis
- In a §351 exchange, liabilities assumed that exceed the total basis of the property transferred are gain to the transferor.· IRC §357(c)
- Distributions of appreciated property
- The corporation recognizes gain as if it sold the property. The shareholder's distribution and basis are measured at fair market value.· IRC §311(b), §301(b), (d)
- Sourcing of services and royalties
- Compensation for services is sourced where the services are performed, and royalties where the property is used.· IRC §861(a)(3)-(4), §862(a)(3)-(4)
- FDAP income of foreign corporations
- U.S.-source fixed or determinable income not effectively connected with a U.S. business is taxed at 30% of the gross amount and withheld at source.· IRC §881(a), §1442
- Controlled foreign corporation
- A foreign corporation is a CFC if U.S. shareholders, each owning at least 10% by vote or value, together own more than 50%.· IRC §951(b), §957(a)
- Permanent establishment
- A fixed place of business, or a dependent agent who habitually concludes contracts, creates a permanent establishment. Storage and delivery facilities, independent agents and short construction projects do not.· U.S. Model Income Tax Convention (2016), Art. 5
- S corporation basis ordering
- Basis is increased for income first, then reduced for distributions, and only then reduced for losses and deductions.· Treas. Reg. §1.1367-1(f)
- S corporation debt basis
- Only a bona fide debt the corporation owes directly to the shareholder counts. A guarantee creates none until the shareholder pays. Later net increases restore reduced debt basis before stock basis.· Treas. Reg. §1.1366-2(a)(2); IRC §1367(b)(2)
- Partnership liabilities
- An increase in a partner's share of liabilities is treated as a contribution of money. A decrease is treated as a distribution of money, and it produces gain to the extent it exceeds basis.· IRC §752(a)-(b), §731(a)(1)
- Basis of distributed property
- In a nonliquidating distribution, property takes the partnership's basis, limited to outside basis less cash. In a liquidating distribution, it takes outside basis less cash.· IRC §732(a)-(b)
- Transfers of an interest
- With a §754 election, or with a substantial built-in loss over $250,000, inside basis is adjusted for the transferee alone.· IRC §743(a)-(b), (d)
- Capital gains and DNI
- Gains allocated to corpus and not distributed or set aside for charity are excluded from distributable net income.· IRC §643(a)(3)
- Tax-exempt income carried out
- No distribution deduction is allowed for the part of a distribution made up of tax-exempt income.· IRC §661(c)
- Political campaign prohibition
- A §501(c)(3) organization may not participate or intervene in any campaign for or against a candidate for public office.· IRC §501(c)(3)
- Automatic revocation
- Failing to file a required annual return or notice for three consecutive years revokes exempt status.· IRC §6033(j)(1)
- Unrelated business income
- Income from a regularly carried on trade or business not substantially related to the exempt purpose is taxed. Dividends, interest, royalties and most real property rents are excluded.· IRC §512(b), §513(a)
Area III: Entity Tax Planning
10–20% of the exam- Default classification
- A domestic eligible entity with two or more members is a partnership, and one with a single owner is disregarded, unless it elects otherwise.· Treas. Reg. §301.7701-3(b)(1)
- Corporate liquidation
- The corporation recognizes gain or loss as if it sold its property at fair market value. The shareholder treats what it receives as payment for the stock.· IRC §336(a), §331(a)
- Partnership distributions
- Neither the partnership nor the partner recognizes gain on a distribution of property other than money in excess of basis.· IRC §731(a)-(b)
- Large corporation estimated tax
- A corporation with taxable income of $1,000,000 or more in any of the three preceding years may use the prior-year tax only for its first installment.· IRC §6655(d)(2), (g)(2)
- Prior-year safe harbor
- The prior-year exception is available only if that year was 12 months long and the return showed a tax liability.· IRC §6655(d)(1)(B)
- Accruals to related parties
- An accrual-method payer deducts an amount owed to a related cash-method payee only when the payee includes it in income.· IRC §267(a)(2)
- P.L. 86-272
- A state may not impose net income tax when the only in-state activity is soliciting orders for tangible goods, with the orders approved and filled from outside the state.· 15 U.S.C. §381(a)
- Built-in gains recognition period
- The tax applies to built-in gain recognized in the five years beginning on the first day of the first S corporation year, at the highest corporate rate.· IRC §1374(b)(1), (d)(7)
- Termination by ineligibility
- The election ends on the day the corporation ceases to qualify, which splits the year into S and C short years. A new election generally must wait five years.· IRC §1362(d)(2), (e), (g)
- Electing to distribute E&P first
- With the consent of all affected shareholders, an S corporation may treat distributions as coming from accumulated E&P before AAA.· IRC §1368(e)(3)
- Contributed property
- Built-in gain is allocated to the contributing partner. Built-in loss is taken into account only for that partner, and distributing the property to another partner within seven years triggers the contributor's gain.· IRC §704(c)(1)(A)-(C)
- Guaranteed payments
- Payments for services or capital that do not depend on partnership income are included by the partner and deducted by the partnership.· IRC §707(c)
Area IV: Property Transactions (Disposition of Assets)
10–20% of the exam- Like-kind real property
- Only real property held for productive use in a business or for investment qualifies. U.S. and foreign real property are not like kind.· IRC §1031(a)(1), (h)
- Deferred exchange deadlines
- Replacement property must be identified within 45 days and received by the earlier of 180 days or the return due date, including extensions.· IRC §1031(a)(3)
- Involuntary conversion replacement period
- Generally two years after the close of the first year in which gain is realized. It is three years for condemned real property held for business or investment.· IRC §1033(a)(2)(B), (g)(4)
- Principal residence exclusion
- Up to $250,000 of gain, or $500,000 on a qualifying joint return, is excluded if the home was owned and used as a principal residence for two of the five years before the sale.· IRC §121(a)-(b)
- Five-year lookback
- A net §1231 gain is ordinary income to the extent of non-recaptured net §1231 losses from the five preceding years.· IRC §1231(c)
- Section 1245 recapture
- Gain on depreciable personal property is ordinary income up to the depreciation taken.· IRC §1245(a)(1)
- Unrecaptured §1250 gain
- For individuals, gain on depreciable real property attributable to depreciation is taxed at a maximum 25% rate. Corporations instead treat 20% of the recapture difference as ordinary income under §291.· IRC §1(h)(6); §291(a)(1)
- Section 1244 stock
- An individual who acquired the stock at original issue may treat up to $50,000 of loss, or $100,000 on a joint return, as ordinary each year.· IRC §1244(a)-(b)
- Gross profit ratio
- Each payment is gain in the ratio of gross profit to total contract price.· IRC §453(c)
- Recapture in the year of sale
- Recapture income is recognized when the sale occurs, and only the remaining gain is reported on the installment method.· IRC §453(i)
- Related-party losses
- Losses on sales between related persons are disallowed. A related buyer who later sells at a gain recognizes it only to the extent it exceeds the disallowed loss.· IRC §267(a)(1), (d)
- Family attribution
- An individual is treated as owning stock owned by siblings, spouse, ancestors and lineal descendants. In-laws are not included.· IRC §267(c)(2), (c)(4)
- Depreciable property sold to a controlled entity
- Gain is ordinary income when the property is depreciable in the related buyer's hands.· IRC §1239(a)
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