Certified Public Accountant (CPA) Taxation and Regulation (REG) — Core Syllabus

Taxation and Regulation (REG) — Core syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Taxation and Regulation (REG) — Core in Certified Public Accountant (CPA), not a summary of it.

1. 1

   Ethics, Professional Responsibilities, and Federal Tax Procedures

   5 topics

   • Circular 230 and practice before the IRS
   • Tax return preparer responsibilities and penalties
   • Substantial authority and reasonable basis standards
   • Statutes of limitations for assessment and refund
   • Taxpayer penalties and the audit/appeals process
2. 2

   Business Law

   6 topics

   • Agency relationships and authority
   • Contracts
     • Formation, consideration, and capacity
     • Performance, breach, and remedies
     • Uniform Commercial Code Article 2 (sales)
   • Debtor-creditor relationships and secured transactions
   • Bankruptcy under federal law
   • Business structures and entity selection
     • Formation and operation of partnerships and LLCs
     • Corporate governance and shareholder rights
   • Federal securities regulation (1933 and 1934 Acts)
3. 3

   Federal Taxation of Individuals

   8 topics

   • Gross income inclusions and exclusions
   • Adjustments, deductions, and the standard deduction
   • Itemized deductions
   • Filing status and dependents
   • Tax credits
     • Child tax credit and earned income credit
     • Education and dependent care credits
   • Capital gains and losses for individuals
   • Passive activity and at-risk limitations
   • Alternative minimum tax for individuals
4. 4

   Federal Taxation of Entities

   6 topics

   • C corporation taxation
     • Book-to-tax reconciliation (Schedule M-1/M-3)
     • Dividends-received deduction and NOLs
   • S corporation taxation and shareholder basis
   • Partnership taxation
     • Partner basis and at-risk amounts
     • Distributions and guaranteed payments
   • Formation, distributions, and liquidation of entities
   • Tax-exempt organizations and unrelated business income
   • Multijurisdictional and state apportionment basics
5. 5

   Property Transactions and Gifts and Estates

   6 topics

   • Basis of acquired property
   • Amount and character of gain or loss
     • Section 1231, 1245, and 1250 recapture
     • Capital versus ordinary asset classification
   • Nonrecognition transactions
     • Like-kind exchanges (Section 1031)
     • Involuntary conversions
   • Cost recovery — depreciation, amortization, and depletion
     • MACRS and Section 179 expensing
     • Bonus depreciation
   • Federal gift tax
   • Federal estate tax and the unified credit

Taxation and Regulation (REG) — Core flashcards for Certified Public Accountant (CPA)

19 of 51 cards from the Taxation and Regulation (REG) — Core deck — real questions with worked answers.

1. What is Treasury Circular 230?

   The set of Treasury Department regulations governing practice before the IRS by attorneys, CPAs, enrolled agents, enrolled actuaries, and other practitioners. It sets ethical and professional conduct rules; violations can lead to censure, suspension, disbarment, and monetary penalties.

2. Under Circular 230, who is authorized to practice before the IRS?

   Attorneys, CPAs, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and registered tax return preparers (limited). Unenrolled preparers have very limited representation rights.

3. Under Circular 230, what must a practitioner do upon learning of a client's error or omission on a return?

   Promptly advise the client of the error/omission and of the consequences under the Code and regulations. The practitioner is NOT required to notify the IRS or correct it without client consent.

4. Under Circular 230, may a practitioner charge a contingent fee for preparing an original tax return?

   Generally no. Contingent fees are prohibited for original returns, but are allowed for (a) IRS examination/challenge of a return, (b) claims for refund of interest/penalties, and (c) judicial proceedings.

5. What is the preparer penalty under IRC §6694(a) for an unreasonable position?

   The greater of $1,000 or 50% of the income derived (or to be derived) by the preparer, when an understatement is due to a position lacking substantial authority (or reasonable basis if disclosed) that the preparer knew or should have known.

6. What is the preparer penalty under IRC §6694(b) for willful or reckless conduct?

   The greater of $5,000 or 75% of the income derived by the preparer for understatements due to willful attempts to understate liability or reckless/intentional disregard of rules.

7. What is the 'substantial authority' standard for tax positions?

   An objective standard, roughly a greater than 33%–40% likelihood of being sustained on the merits. It is higher than reasonable basis but lower than 'more likely than not' (>50%). Meeting it avoids the §6662 accuracy penalty even without disclosure.

8. What is the 'reasonable basis' standard for tax positions?

   A relatively high standard significantly higher than 'not frivolous,' roughly a 20% or greater chance of success, based on authorities. A disclosed position meeting reasonable basis can avoid certain penalties.

9. Rank the tax position confidence standards from lowest to highest.

   Frivolous/not frivolous < reasonable basis (~20%) < realistic possibility of success (~33%) < substantial authority (~40%) < more likely than not (>50%) < should/will (high certainty).

10. What is the general statute of limitations for the IRS to assess additional tax?

    3 years from the later of the return's due date or the date it was actually filed.

11. When does the IRS get a 6-year statute of limitations for assessment?

    When the taxpayer omits gross income exceeding 25% of the gross income reported on the return (substantial omission).

12. What is the statute of limitations for assessment when a return is fraudulent or never filed?

    There is no statute of limitations — the IRS may assess tax at any time for a false/fraudulent return filed with intent to evade tax, or where no return was filed.

13. What is the statute of limitations for a taxpayer to claim a tax refund?

    The later of 3 years from the date the return was filed or 2 years from the date the tax was paid.

14. What is the IRC §6662 accuracy-related penalty rate for substantial understatement or negligence?

    20% of the underpayment attributable to the misconduct (negligence, substantial understatement, substantial valuation misstatement, etc.).

15. What constitutes a 'substantial understatement' of income tax for an individual under §6662?

    An understatement exceeding the greater of 10% of the tax required to be shown on the return, or $5,000.

16. What is the civil fraud penalty under IRC §6663?

    75% of the portion of the underpayment attributable to fraud.

17. What is the failure-to-file penalty rate and the failure-to-pay penalty rate?

    Failure to file: 5% of unpaid tax per month (or part), up to 25%. Failure to pay: 0.5% per month, up to 25%. When both apply in a month, the failure-to-file penalty is reduced by the failure-to-pay penalty.

18. Outline the basic IRS audit and appeals process.

    Return is examined (correspondence, office, or field audit) → Revenue Agent issues a 30-day letter with proposed adjustments → taxpayer may request an IRS Appeals Office conference → if unresolved, a 90-day letter (Statutory Notice of Deficiency) is issued → taxpayer may petition the U.S. Tax Court within 90 days without first paying.

19. In agency law, what is the difference between actual and apparent authority?

    Actual authority is granted by the principal to the agent (express or implied). Apparent authority arises from the principal's conduct that leads a third party to reasonably believe the agent has authority, even if no actual authority exists.

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