CPA REG — U.S. - Taxation and Regulation Exam Blueprint
Practical CPA REG exam blueprint for AICPA U.S. CPA REG - Taxation and Regulation review, with tax, regulation, calculation, and final-week readiness checks.
How to Use This Exam Blueprint
Use this independent Exam Blueprint as a practical study map for AICPA U.S. CPA REG - Taxation and Regulation, exam code CPA REG. It is designed to help you translate broad taxation and regulation topics into review tasks, judgment checks, and final-readiness prompts.
For each area, ask:
- Can I identify the issue from client facts?
- Can I choose the correct taxpayer, entity, or transaction rule?
- Can I calculate the result without over-relying on memorized examples?
- Can I explain why the wrong answer choices are wrong?
- Can I handle document-based facts such as K-1s, contracts, basis schedules, notices, or closing statements?
Do not treat this as an official weighting guide. Use current AICPA materials and your review course for the latest exam-specific details, tax-year assumptions, and authoritative updates.
Topic-Area Readiness Table
| Readiness area | What to review | You are ready when you can… | Common evidence of weakness |
|---|---|---|---|
| Ethics, professional responsibilities, and tax practice | Return positions, preparer duties, taxpayer duties, confidentiality, conflicts, penalties, IRS procedure vocabulary | Decide what a CPA may, must, or must not do in a tax-practice scenario | You know definitions but miss who has the duty: taxpayer, preparer, CPA, IRS, or court |
| Federal tax procedures | Filing, assessment, collections, audits, statute concepts, appeals, penalties, interest, authority hierarchy | Read a notice or procedural fact pattern and select the next appropriate action | You confuse refund claims, amended returns, deficiency procedures, and penalty relief |
| Individual taxation | Gross income, exclusions, adjustments, deductions, credits, filing status, dependents, property sales, retirement items, investment items | Build taxable income from facts and classify each item correctly | You memorize lists but misclassify above-the-line vs itemized vs credit items |
| Property transactions | Basis, amount realized, recognized gain or loss, holding period, depreciation, capital vs ordinary treatment, nonrecognition concepts | Calculate basis and gain/loss, then determine character and timing | You calculate the amount but miss whether it is recognized, deferred, ordinary, capital, or recaptured |
| C corporations | Formation, taxable income, book-tax differences, distributions, dividends, accumulated earnings concepts, liquidation, corporate tax attributes | Separate corporate-level tax consequences from shareholder-level consequences | You treat corporate distributions like partnership distributions or ignore earnings and profits logic |
| S corporations | Eligibility concepts, shareholder basis, ordinary income, separately stated items, distributions, loss limitations | Track flow-through items and determine the shareholder tax effect | You skip basis limits or fail to separate entity-level information from shareholder-level reporting |
| Partnerships | Formation, outside basis, inside basis, liabilities, guaranteed payments, separately stated items, distributions, sale of interest | Reconcile partner basis and identify tax consequences to both partner and partnership | You forget debt-share changes, guaranteed payment treatment, or hot-asset implications |
| Trusts, estates, and gifts | Basic transfer-tax vocabulary, income distribution concepts, beneficiary vs fiduciary reporting | Recognize when a fact pattern is about income taxation versus transfer taxation | You apply individual income tax rules without noticing fiduciary or transfer-tax facts |
| Business law | Agency, contracts, UCC sales, negotiable instruments, secured transactions, debtor-creditor rights, bankruptcy, business entities | Determine rights, duties, formation, priority, breach, and remedies from facts | You rely on common-sense fairness instead of legal elements and priority rules |
| Tax research and authority | Primary vs secondary authority, Code, regulations, rulings, cases, substantial authority concepts | Rank authority and decide whether a position is supportable | You overvalue IRS publications, articles, or informal explanations |
| Integrated client scenarios | Entity choice, owner compensation, distributions, asset sales, compliance, documentation, ethics | Combine tax calculation with legal and professional responsibility judgment | You solve isolated calculations but lose the decision path in mixed scenarios |
High-Priority “Can You Do This?” Checklist
Tax Issue Recognition
- Identify the taxpayer type before applying a rule: individual, C corporation, S corporation, partnership, estate, trust, or exempt-type entity.
- Distinguish tax consequences to the entity from consequences to the owner, shareholder, partner, or beneficiary.
- Recognize when a scenario is asking for inclusion, deduction, credit, basis, character, timing, procedure, penalty, or disclosure.
- Separate federal tax treatment from financial accounting treatment.
- Identify whether a transaction is taxable now, deferred, partially recognized, or excluded.
- Determine whether a fact is relevant, irrelevant, or a distractor.
- Notice dates, holding periods, ownership percentages, relationship rules, and entity status changes.
- Explain the rule in plain English before calculating.
Professional Responsibilities and Tax Procedure
- Determine when a CPA can rely on client information and when further inquiry is required.
- Identify confidentiality, conflict-of-interest, and client-consent issues.
- Distinguish negligence, disregard, substantial understatement, fraud, and failure-to-file/payment concepts at a high level.
- Recognize return-position standards and when disclosure may matter.
- Know the difference between preparing, signing, advising, representing, and advocating.
- Distinguish taxpayer penalties from preparer penalties.
- Identify the role of administrative guidance, court decisions, regulations, and the Internal Revenue Code.
- Recognize statute and deadline issues without assuming facts not given.
- Know what type of document or notice the client has received and what response is being tested.
Individual Taxation
- Classify income as taxable, excluded, deferred, or partially taxable.
- Identify common income items: wages, interest, dividends, business income, capital gains, retirement distributions, unemployment, Social Security benefits, alimony under applicable rules, rents, royalties, prizes, and debt cancellation.
- Distinguish exclusions from deductions.
- Determine filing status from marital, household, and dependent facts.
- Identify dependent qualification issues using relationship, residence, support, age, income, and joint-return style facts.
- Separate adjustments to income from itemized deductions and credits.
- Identify medical, tax, interest, charitable, casualty, and miscellaneous-type item issues at a conceptual level.
- Recognize when limitations, floors, phaseouts, or thresholds may apply, and consult current-year materials for exact values.
- Treat capital gains and losses separately from ordinary income.
- Apply passive activity, at-risk, and basis-style limitations where relevant.
- Identify self-employment income and related tax considerations.
- Recognize retirement contribution and distribution issues, including penalties or exceptions when tested.
Property Transactions
- Calculate adjusted basis from acquisition cost, improvements, depreciation, and other adjustments.
- Compute amount realized from cash, property received, liabilities relieved, and selling costs.
- Distinguish realized gain/loss from recognized gain/loss.
- Determine whether a loss is deductible, nondeductible personal, limited, deferred, or disallowed.
- Identify capital, ordinary, Section 1231-style, and recapture-style character issues.
- Recognize related-party sales and wash-sale style traps when relevant.
- Determine basis in property received in gifts, inheritances, contributions, distributions, and exchanges.
- Identify nonrecognition transactions and the role of boot, liabilities, and carryover basis.
- Track holding period when it affects character.
- Explain why the tax result differs for personal-use, investment, business, and inventory property.
Entity Taxation
- Identify whether an entity is taxed as a C corporation, S corporation, partnership, or disregarded entity.
- Distinguish entity formation from operation, distribution, sale, and liquidation.
- Track shareholder or partner basis through contributions, income, deductions, distributions, and debt changes.
- Determine which items are ordinary business income and which are separately stated.
- Apply loss limitations in the correct conceptual order.
- Identify when compensation, guaranteed payments, dividends, draws, or distributions are being tested.
- Distinguish corporate earnings and profits concepts from partnership capital accounts and tax basis.
- Analyze property contributions and distributions for both the entity and the owner.
- Identify built-in gain, related-party, and recapture-type issues when facts point to them.
- Recognize when an ownership percentage, shareholder eligibility, or entity election fact matters.
Business Law and Regulation
- Identify agency relationships and the authority of agents.
- Determine when a principal is liable for an agent’s acts.
- Distinguish contract formation, performance, breach, remedies, assignment, delegation, and discharge.
- Recognize when Article 2 sale-of-goods rules are being tested instead of common-law contract rules.
- Identify negotiable-instrument requirements and holder concepts at a high level.
- Determine attachment, perfection, and priority basics for secured transactions.
- Recognize bankruptcy vocabulary, estate property, automatic stay concepts, creditor priority, and discharge issues.
- Distinguish general partnerships, limited partnerships, LLCs, and corporations for liability and management purposes.
- Identify when a statute of frauds, warranty, merchant, or good-faith concept controls the outcome.
- Apply legal elements rather than relying on what seems fair.
Calculation and Formula Readiness
Know the formulas well enough to use them flexibly. CPA REG questions often test whether you can select the right starting point, include the right facts, and stop at the right tax result.
Core Taxable Income Structure
Use this as a conceptual structure, not as a substitute for current-year rules or item-specific limitations.
\[ \text{Taxable income} = \text{Gross income} - \text{Adjustments} - \text{Allowable deductions} \]Readiness checks:
- Can you decide whether an item belongs in gross income, is excluded, or is deferred?
- Can you distinguish deductions from credits?
- Can you identify when a deduction is limited by percentage, floor, basis, at-risk, passive activity, business interest, or other constraints?
- Can you avoid deducting the same item twice?
- Can you explain the tax effect of a credit versus a deduction?
Basis and Gain/Loss
\[ \text{Adjusted basis} = \text{Initial basis} + \text{Capital additions} - \text{Cost recovery} - \text{Other reductions} \]\[ \text{Realized gain or loss} = \text{Amount realized} - \text{Adjusted basis of property transferred} \]\[ \text{Amount realized} = \text{Cash received} + \text{FMV of property received} + \text{Liabilities relieved} - \text{Selling costs} \]Readiness checks:
- Can you identify the property being transferred?
- Can you determine whether liabilities are assumed, relieved, or retained?
- Can you calculate realized gain even when recognized gain is different?
- Can you identify basis of property received after a nonrecognition transaction?
- Can you explain how depreciation affects adjusted basis and recapture?
Entity Owner Basis
\[ \text{Ending basis} = \text{Beginning basis} + \text{Increases} - \text{Decreases} \]Readiness checks:
- Can you identify basis increases such as contributions, income, gains, and certain liability increases?
- Can you identify basis decreases such as distributions, losses, deductions, nondeductible expenses, and certain liability decreases?
- Can you apply the correct basis rules for a shareholder versus a partner?
- Can you decide whether a distribution is taxable, tax-free to the extent of basis, or reduces basis?
- Can you apply basis limits before deducting losses?
Loss Limitation Decision Path
For flow-through or owner-level losses, use a disciplined order.
- Is the taxpayer allowed to recognize the loss at all?
- Does the taxpayer have sufficient basis?
- Does an at-risk limitation apply?
- Is the loss passive or active?
- Are there other current-year limitations or carryforward rules?
- Is the remaining deductible loss ordinary, capital, or separately limited?
Exam trap: a loss may be economically real but not currently deductible.
Scenario and Decision-Point Checks
| Scenario cue | First question to ask | Rule area likely being tested | Ready response |
|---|---|---|---|
| “CPA learns client omitted income from a prior return” | What is the CPA’s duty after discovering the error? | Professional responsibilities, tax practice | Advise the client appropriately; do not silently ignore the issue or make unsupported filings |
| “Taxpayer receives property and assumes debt” | Is the debt part of amount realized, basis, or both? | Property transactions, basis | Track liabilities from both transferor and transferee perspectives |
| “Shareholder receives cash from corporation” | Is it dividend, return of capital, capital gain, compensation, or loan? | C corporation distributions | Analyze earnings and profits, basis, and substance |
| “Partner receives distribution from partnership” | Is the distribution cash, property, or both? | Partnership distributions | Apply outside basis and distribution ordering concepts |
| “S corporation shareholder deducts loss” | Does the shareholder have basis and meet other limitations? | S corporation basis and losses | Apply shareholder-level limits before allowing deduction |
| “Business owner pays self a salary/draw/distribution” | What entity type is involved? | Entity taxation | Do not apply corporate payroll logic to partnership draws or guaranteed payments |
| “Asset used partly personally and partly for business” | What portion is business/investment versus personal? | Deductions, depreciation, gain/loss | Allocate and avoid deducting personal portions |
| “Related parties transact” | Is a loss, deduction, interest, or timing rule affected? | Related-party rules | Look for disallowance, deferral, or recharacterization |
| “Property sold at a gain after depreciation” | Is any gain recaptured or treated differently? | Depreciation recapture, character | Separate amount, character, and holding period |
| “Contract involves sale of goods” | Is UCC Article 2 relevant? | Business law | Use sales-of-goods rules rather than only common-law contract rules |
| “Security interest is filed after another creditor” | Who attached, perfected, and has priority? | Secured transactions | Compare attachment, perfection method, timing, and collateral type |
| “Agent signs agreement for principal” | Did the agent have authority? | Agency | Analyze actual, apparent, ratification, and disclosure facts |
| “Client wants aggressive tax position” | Is there authority and disclosure support? | Tax ethics and research | Evaluate support level, disclosure, and preparer responsibilities |
Tax Authority and Research Readiness
| Authority or source type | What to know | Readiness prompt |
|---|---|---|
| Internal Revenue Code | Primary statutory authority | Can you recognize when the Code controls the issue? |
| Treasury regulations | Interpretive or legislative guidance | Can you distinguish final regulations from less authoritative material when relevant? |
| Revenue rulings and revenue procedures | IRS guidance | Can you use them appropriately without overstating their weight? |
| Court cases | Judicial authority | Can you notice jurisdiction and court-level implications when tested? |
| IRS publications and instructions | Helpful explanations, generally not primary authority | Can you avoid treating them as equivalent to the Code or regulations? |
| Private guidance | Limited-use taxpayer-specific guidance | Can you avoid applying it broadly unless the question allows? |
| Professional standards | CPA conduct, preparer duties, due diligence | Can you connect ethical duty to tax return preparation facts? |
Individual Tax Readiness by Subtopic
| Subtopic | Must be able to identify | Must be able to calculate or decide |
|---|---|---|
| Filing status | Married, unmarried, surviving spouse-type facts, household support, dependent facts | Correct filing status based on facts provided |
| Dependents | Qualifying child vs qualifying relative-style facts | Whether dependency-related benefits may apply |
| Gross income | Compensation, business income, rents, royalties, dividends, interest, gains, retirement, unemployment, prizes | Inclusion amount and character |
| Exclusions | Gifts, inheritances, certain insurance proceeds, municipal bond interest, employer benefits, scholarship-type facts | Whether the exclusion applies and to what portion |
| Adjustments | Retirement, self-employment, health savings, education, alimony under applicable law | Whether deduction is above-the-line or elsewhere |
| Itemized deductions | Medical, taxes, interest, charitable, casualty-type items | Whether item is deductible and whether a limitation may apply |
| Credits | Child, education, foreign tax, general business, refundable vs nonrefundable concepts | Difference between reducing tax and reducing taxable income |
| Capital gains/losses | Short-term vs long-term, netting, carryovers | Character and deductibility limitations |
| Rental and passive activities | Active participation, material participation, passive loss concepts | Whether loss is currently deductible |
| Self-employment | Sole proprietor, independent contractor, partner-type facts | Business income reporting and related tax consequences |
| Retirement items | Contributions, distributions, rollovers, penalties, required distributions at a conceptual level | Taxable portion and penalty possibility |
| Alternative tax concepts | Preference or adjustment-type items when applicable | Recognize that regular taxable income is not always the final tax base |
Entity Tax Readiness by Subtopic
| Entity area | Core checklist | Common traps |
|---|---|---|
| C corporation formation | Property contributed, stock received, control concepts, liability assumption | Recognizing gain when liabilities or boot change the result |
| C corporation operations | Taxable income, book-tax differences, dividends received concepts, charitable and capital loss limits | Mixing financial statement income with taxable income |
| C corporation distributions | Dividend treatment, return of capital, capital gain, earnings and profits concepts | Treating every cash distribution as a dividend |
| Corporate liquidation | Corporate-level and shareholder-level consequences | Forgetting there can be two levels of tax consequence |
| S corporation eligibility | Eligible shareholders, stock class concepts, election-type facts | Ignoring an eligibility fact embedded in the question |
| S corporation income | Ordinary business income and separately stated items | Netting everything at the entity level |
| S corporation basis | Contributions, income, losses, distributions, loans where relevant | Deducting losses beyond basis |
| Partnership formation | Contributions of property and services, liability allocations | Treating partner services the same as property contributions |
| Partnership operations | Ordinary income, separately stated items, guaranteed payments | Misclassifying guaranteed payments as distributions |
| Partnership basis | Outside basis, debt share, increases/decreases | Forgetting liability changes affect partner basis |
| Partnership distributions | Cash, property, basis limitation, gain recognition | Recognizing gain too early or missing excess cash |
| Sale of partnership interest | Capital vs ordinary components | Ignoring unrealized receivables or inventory-type facts |
| Trusts and estates | Fiduciary income, distributable concepts, beneficiary reporting | Confusing income taxation with gift/estate transfer rules |
Business Law Readiness by Subtopic
| Area | Key concepts | “Can you decide?” prompt |
|---|---|---|
| Agency | Actual authority, apparent authority, ratification, undisclosed principal, agent duties | Is the principal bound by the agent’s act? |
| Contracts | Offer, acceptance, consideration, capacity, legality, defenses, breach, remedies | Was a valid contract formed, and what remedy applies? |
| UCC sales | Goods, merchants, firm offers, perfect tender, warranties, risk of loss | Does the sale-of-goods rule change the result? |
| Secured transactions | Attachment, perfection, financing statements, priority, default | Which creditor has priority and why? |
| Negotiable instruments | Negotiability, holder, holder in due course concepts, defenses | Can the instrument be enforced free of certain defenses? |
| Debtor-creditor law | Liens, suretyship, guaranty, creditor remedies | Who is liable and what can the creditor collect? |
| Bankruptcy | Estate, automatic stay, secured/unsecured claims, priority, discharge | What happens to debtor assets and creditor claims? |
| Business entities | Partnership, LLC, corporation, limited liability, authority, fiduciary duties | Who is personally liable and who can bind the entity? |
| Professional regulation | CPA duties, client records, confidentiality, independence-style concepts when relevant | What action is permitted, prohibited, or required? |
Document and Artifact Checks
You should be comfortable extracting facts from common tax and legal artifacts. Practice reading them for issue cues, not just numbers.
| Artifact | What to look for | Possible tested issue |
|---|---|---|
| Form W-2 or payroll summary | Wages, withholding, benefits | Gross income, withholding, employer benefits |
| Form 1099-style information | Interest, dividends, nonemployee compensation, retirement, cancellation of debt | Income classification and reporting |
| Schedule K-1-style information | Ordinary income, separately stated items, distributions, basis clues | Partnership or S corporation owner taxation |
| Depreciation schedule | Cost, date placed in service, accumulated depreciation, method | Adjusted basis, cost recovery, recapture |
| Closing statement | Sales price, debt payoff, selling costs, prorations | Amount realized, basis, real estate tax treatment |
| Partnership agreement | Profit/loss shares, capital contributions, liabilities, guaranteed payments | Allocation, basis, partner tax consequences |
| Corporate records | Stock ownership, distributions, earnings, loans, compensation | Dividend vs compensation vs loan treatment |
| IRS notice | Tax year, proposed adjustment, penalty, response date | Procedure, documentation, taxpayer action |
| Engagement letter | Scope, responsibilities, limitations | Professional responsibility and client expectations |
| Contract | Parties, offer, acceptance, performance, breach, remedies | Business law elements |
| Security agreement and filing | Collateral description, debtor name, filing date | Attachment, perfection, priority |
| Bankruptcy petition or claim list | Secured status, priority, dischargeability cues | Creditor rights and debtor relief |
Common Weak Areas and Traps
Tax Traps
- Confusing realized gain with recognized gain.
- Ignoring liabilities in property transfers.
- Deducting personal expenses as business or investment expenses.
- Treating exclusions as deductions.
- Forgetting that credits reduce tax, while deductions reduce taxable income.
- Missing character: ordinary, capital, Section 1231-style, recapture, passive, portfolio, or separately stated.
- Applying corporate distribution rules to partnerships or S corporations.
- Forgetting shareholder or partner basis before allowing losses.
- Ignoring debt-share changes in partnership basis.
- Treating every owner payment as compensation.
- Missing related-party limitations or timing effects.
- Assuming book income equals taxable income.
- Applying current-year thresholds from memory without confirming the exam’s applicable tax-year materials.
Ethics and Procedure Traps
- Choosing what is convenient for the client rather than what professional standards allow.
- Failing to distinguish taxpayer duty from preparer duty.
- Treating all IRS guidance as equal authority.
- Ignoring disclosure when a position lacks sufficient support.
- Missing the difference between an error discovered before filing and one discovered after filing.
- Confusing civil penalties with criminal fraud concepts.
- Overlooking who signed, prepared, advised, or merely reviewed the return.
Business Law Traps
- Applying common-law contract rules to a sale-of-goods fact pattern.
- Assuming oral agreements are always unenforceable or always enforceable.
- Missing merchant-specific rules.
- Confusing assignment with delegation.
- Treating attachment and perfection as the same event.
- Choosing the first creditor in time without checking perfection and priority exceptions.
- Ignoring whether an agent had actual authority, apparent authority, or ratification.
- Assuming limited liability protects against personal guarantees or personal torts.
Mixed Scenario Practice Prompts
Use these prompts to test whether you can integrate tax, regulation, and legal reasoning.
Prompt 1: Entity Owner Loss
A taxpayer owns part of a flow-through entity. The entity reports a loss and separately stated deductions. The taxpayer also received a distribution during the year.
Can you answer?
- What entity type is involved?
- What is the taxpayer’s beginning basis?
- What items increase basis?
- What items decrease basis?
- Does the distribution create gain?
- Is the loss limited by basis?
- Do at-risk or passive limitations apply?
- What carries forward if the full loss is not deductible?
Prompt 2: Property Sale
A client sells business equipment that had prior depreciation.
Can you answer?
- What was the original basis?
- What depreciation or cost recovery reduced basis?
- What is the adjusted basis?
- What is the amount realized?
- What is the realized gain or loss?
- Is the gain recognized now?
- Is any portion ordinary due to recapture?
- Is the remaining amount capital or Section 1231-style?
Prompt 3: CPA Conduct
A CPA discovers that a client provided unsupported deductions and wants the CPA to file anyway.
Can you answer?
- What professional standard is implicated?
- Can the CPA rely on the client’s representation?
- Is further inquiry required?
- Is disclosure needed?
- Should the CPA withdraw, modify the work, or refuse to sign?
- What should be documented?
Prompt 4: Secured Transaction
A lender gave value, the debtor signed a security agreement, and another creditor later filed a financing statement.
Can you answer?
- Did attachment occur?
- Was the collateral adequately described?
- Was perfection achieved?
- Which creditor perfected first?
- Is there a purchase-money or collateral-specific priority issue?
- What happens on debtor default?
Final-Week Checklist
Technical Review
- Rework your weakest individual tax topics without looking at notes.
- Recalculate basis problems until you can explain every increase and decrease.
- Drill entity distributions for C corporations, S corporations, and partnerships side by side.
- Review professional responsibility scenarios as judgment questions, not vocabulary questions.
- Practice business law questions by identifying the legal element first.
- Review tax authority hierarchy and return-position standards.
- Refresh current-year tax amounts, thresholds, and limitations using current materials.
- Build a one-page sheet of formulas, basis rules, and loss-limitation order.
- Compare book-tax and tax-only treatments for common corporate items.
- Practice reading short documents for facts that change the tax result.
Calculation Discipline
- Write the taxpayer/entity type at the top of your scratch work.
- Label basis as inside, outside, shareholder, partner, asset, or stock basis.
- Label gain as realized, recognized, ordinary, capital, deferred, or recaptured.
- Use signs consistently for income, deductions, distributions, and losses.
- Check whether the question asks for taxable income, tax liability, deduction, basis, gain, or character.
- Reconcile final answers to the wording of the question.
- If two answers are close, identify which fact one of them ignores.
Scenario Judgment
- For ethics questions, identify the actor and duty before choosing an answer.
- For procedure questions, identify the stage: filing, audit, assessment, collection, refund, appeal, or litigation.
- For business law questions, identify the governing rule area: agency, contract, UCC, secured transaction, bankruptcy, or entity law.
- For entity tax questions, identify whether the issue is at formation, operation, distribution, sale, or liquidation.
- For property questions, identify whether the property is personal-use, investment, inventory, or business property.
- For every missed question, write the rule that would have made the correct answer obvious.
Practical Next Step
Choose the three readiness areas where you checked the fewest boxes. For each one, complete a focused set of calculation questions, scenario questions, and document-based practice. Then redo the missed questions after a delay and explain the rule aloud before looking at the answer.