CPA TCP Tax Compliance & Planning (Discipline)

Under the CPA Evolution model, which three sections are the core sections that all candidates must pass before selecting a discipline?

• AAUD, FAR, BEC
• BAUD, FAR, REG
• CFAR, REG, TCP
• DAUD, REG, BAR

How is the TCP section's score calculated between MCQs and TBSs?

• A60% MCQ / 40% TBS
• B50% MCQ / 50% TBS
• C70% MCQ / 30% TBS
• D100% MCQ

When are 2024-2025 effective-date provisions of the One Big Beautiful Bill Act (OBBBA) first eligible for testing on TCP?

• AJanuary 1, 2026
• BApril 1, 2026
• CJuly 1, 2026
• DOctober 1, 2026

A 50-year-old taxpayer with $200,000 in modified AGI converts $80,000 from a traditional IRA to a Roth IRA in 2026. Which statement is correct regarding the Roth conversion?

• AThe conversion is tax-free because the taxpayer is over age 50
• BThe $80,000 is included in 2026 ordinary income; no 10% early-withdrawal penalty applies…
• COnly the earnings portion of $80,000 is taxable; basis is recovered first
• DThe conversion is barred because MAGI exceeds the Roth contribution phase-out

The Net Investment Income Tax (NIIT) under §1411 applies at a rate of:

• A0.9% on wages above the threshold
• B3.8% on the lesser of net investment income or MAGI over threshold
• C15% on long-term capital gains
• D20% on qualified dividends

Which of the following is NOT subject to the 3.8% NIIT?

• AInterest on corporate bonds
• BDividends from a publicly traded stock
• CWages from self-employment
• DNet gain from sale of a passive partnership interest

Under SECURE 2.0, the required beginning date for required minimum distributions (RMDs) from a traditional IRA is age:

• A70½ for everyone
• B72 for everyone
• C73 for individuals turning 72 in 2023 or later (rising to 75 in 2033)
• D75 effective immediately

A taxpayer fails to take a $20,000 RMD on time in 2026. Under SECURE 2.0, the excise tax penalty is:

• A50% of the missed RMD
• B25%, reduced to 10% if corrected within the correction window
• C10% in all cases
• DNo penalty if corrected before the IRS audits

The federal annual gift tax exclusion for 2026 is approximately:

• A$15,000 per donee
• B$17,000 per donee
• C$19,000 per donee
• D$25,000 per donee

Under OBBBA, the federal estate and gift tax basic exclusion amount was made permanent at what indexed level beginning in 2026?

• A$5 million (2017 sunset level)
• B$10 million baseline indexed (about $13.99M for 2025) — sunsetting after 2025 under TCJA
• C$15 million per individual indexed for inflation, made permanent
• D$25 million per individual

Portability of the deceased spousal unused exclusion (DSUE) under §2010(c) requires:

• ANo election — it is automatic
• BA timely-filed Form 706 (estate tax return) by the executor of the predeceased spouse, ev…
• CAn election by the surviving spouse on Form 709 within nine months of death
• DSpousal residence in a community-property state

Generation-Skipping Transfer (GST) tax applies to which of the following transfers?

• AA gift from a grandparent directly to a grandchild whose parent (the grandparent's child)…
• BA gift from one spouse to the other spouse
• CA gift from a parent to an adult child
• DA bequest to a sibling

Distributions from a 529 qualified tuition plan are tax-free for federal purposes when used for:

• AAny education-related expense at any institution worldwide
• BQualified higher education expenses at an eligible institution, plus K-12 tuition and lis…
• COnly undergraduate tuition and required fees
• DOnly graduate-level tuition

Under SECURE 2.0, a §529 plan that has been in place for at least 15 years can transfer up to a lifetime cap of how much, tax-free, to a Roth IRA in the name of the same beneficiary?

• A$5,000
• B$10,000
• C$35,000
• D$50,000

The kiddie tax under §1(g) applies the parent's marginal rate to a dependent child's unearned income above what threshold for 2026?

• A$1,000
• B$2,700 (twice the standard deduction for unearned income)
• C$5,000
• D$12,000

A taxpayer in the 32% federal bracket is comparing two bonds: Bond A (corporate) yielding 5.0% and Bond B (in-state municipal) yielding 3.6%. Ignoring state tax and credit risk, which bond gives the higher after-tax yield?

• ABond A — 5.0% > 3.6%
• BBond B, because the taxable equivalent yield of 3.6% at a 32% bracket is about 5.29%
• CBoth are equal
• DCannot be determined

A noncorporate taxpayer making a cash contribution to a public charity may deduct cash gifts up to what percentage of AGI in 2026?

• A20%
• B30%
• C50%
• D60%

A donor gives appreciated publicly traded stock held 3 years (basis $10,000, FMV $50,000) to a public charity. The donor's deduction is:

• A$10,000 basis
• B$50,000 FMV, subject to the 30% AGI ceiling
• C$50,000 FMV, subject to the 60% AGI ceiling
• D$40,000 (gain only)

A Qualified Charitable Distribution (QCD) from an IRA in 2026 is limited to what annual amount per individual?

• A$50,000
• B$100,000 indexed (approximately $108,000 in 2025; $115,000 area for 2026)
• C$200,000
• DUnlimited

The alternative minimum tax (AMT) for a single individual in 2026 begins to phase out the AMT exemption at what alternative minimum taxable income (AMTI) level?

• A$200,000
• B$609,350 area for 2025 (indexed each year)
• C$1,000,000
• D$2,000,000

Which of the following is an AMT preference or adjustment item?

• AStandard mortgage interest on acquisition indebtedness
• BIncentive stock option (ISO) bargain element on exercise (when not sold same year)
• CLong-term capital gains on publicly traded stock
• DQualified dividends

An individual sells their primary residence in 2026 for $850,000. Basis is $300,000. The taxpayer is single and has lived in the home as a principal residence for 6 of the last 8 years. The recognized gain is:

• A$0
• B$300,000
• C$550,000
• D$250,000

An employer-paid group-term life insurance policy of $100,000 for an employee triggers imputed income on:

• AThe full premium cost
• BPremium attributable to coverage in excess of $50,000, valued using IRS Table I (Reg. §1.…
• CNothing — group-term life is always excluded
• DOnly premiums paid via salary reduction

Distributions from a non-MEC permanent life insurance policy are treated for tax purposes as:

• APro-rata income and basis under §72
• BFIFO — basis recovered first up to cost-basis, then taxable gain, with policy loans gener…
• CAlways fully taxable
• DAlways fully tax-free

A taxpayer worked in California (resident) but earned wages while temporarily on assignment in Oregon. For multistate planning, the most common rule for resolving double tax is:

• AThe taxpayer pays full tax to both states with no relief
• BThe state of residence allows a credit for tax paid to the nonresident state on the same…
• CThe state of source must refund all tax
• DFederal law mandates only one state may tax the income

An individual has earned $7,500 of wages in 2026. The maximum traditional IRA contribution they can make is:

• A$0 — must have $10,000 of earned income
• BLesser of earned income or the $7,000 contribution limit ($8,000 if age 50+)
• C$7,500 — limited to their compensation
• DUnlimited

A spouse with no earned income can contribute to a traditional IRA based on the working spouse's compensation under what rule?

• AThis is never permitted — IRAs require personal earned income
• BThe spousal IRA rule under §219(c) — they can contribute up to the dollar cap based on th…
• COnly Roth IRA contributions are permitted for a non-earning spouse
• DOnly via a SEP IRA

A nonqualified deferred compensation arrangement subject to §409A failure penalties imposes:

• ANo additional penalty beyond ordinary income inclusion
• BImmediate income inclusion of all vested deferrals plus a 20% additional tax and premium-…
• CA 50% excise tax on the entire plan
• DDisqualification of the employer's deduction only

An ISO sold in a 'qualifying disposition' (held more than 1 year from exercise AND 2 years from grant) results in:

• AOrdinary income on the bargain element at exercise; long-term capital gain on additional…
• BAll gain (sale price minus exercise price) treated as long-term capital gain; no ordinary…
• CAll gain treated as ordinary income
• DTax-free disposition

A grantor trust under §671-§679 results in:

• ATrust pays tax at compressed trust rates
• BAll trust income, deductions, and credits reported directly on the grantor's individual r…
• CBeneficiaries receive a K-1 and report income themselves
• DNo tax is owed by anyone

A traditional IRA holder dies at age 60, leaving the IRA to their adult non-disabled child. Under SECURE Act, the child generally must:

• ATake RMDs over their own life expectancy
• BWithdraw the entire balance within 10 years of the year of death (with limited stretch fo…
• CTake a single lump sum within one year
• DRoll the IRA into their own IRA

A taxpayer's 2026 itemized deductions are heavily weighted toward state and local taxes (SALT). Following OBBBA, the SALT deduction cap for 2026 is approximately:

• A$10,000 (TCJA cap, unchanged)
• BIncreased to $40,000 for many filers under OBBBA, with a phase-out at higher AGI
• CUnlimited again
• D$25,000

A Coverdell Education Savings Account (ESA) annual contribution limit per beneficiary is:

• A$500
• B$2,000
• C$5,000
• D$10,000

A single taxpayer's modified AGI is $90,000. They contribute $7,000 to a Roth IRA in 2026. Roth IRA contribution phase-out for single filers in 2025 is $150,000-$165,000 (with similar 2026 indexed levels). The allowable contribution is:

• A$0 — over the phase-out
• B$7,000 — fully under the phase-out
• C$3,500 — partial phase-out
• D$1,000 only

A family-owned business pays for life insurance on a key employee with the corporation as beneficiary. The corporation receives $1,000,000 of death benefits. Under §101(j), the death benefit is excludable from corporate income only if:

• AAlways excludable as a general rule
• BThe employer-owned life insurance (EOLI) notice and consent requirements were satisfied b…
• CThe corporation is a public company
• DThe corporation has held the policy at least 10 years

A C corporation's net operating loss (NOL) generated in tax year 2026 is subject to which limitation?

• A2-year carryback, 20-year carryforward; offsets 100% of taxable income
• BNo carryback (except certain farms); indefinite carryforward; offsets up to 80% of taxabl…
• C5-year carryback, indefinite carryforward; offsets 100%
• DCannot be used at all in current year

Under §163(j) (as modified), the business interest expense deduction limit for 2026 is generally limited to the sum of:

• A30% of taxable income
• BBusiness interest income, plus 30% of adjusted taxable income (ATI) computed on an EBITDA…
• C50% of EBIT only
• D100% of business interest

The §199A qualified business income (QBI) deduction was made permanent by OBBBA at what rate?

• A10% deduction
• B20% deduction of qualified business income, subject to W-2 wage and UBIA limits and SSTB…
• C25% deduction
• DRepealed for 2026 onward

Which of the following is a 'specified service trade or business' (SSTB) under §199A subject to the high-income phase-out?

• AManufacturing
• BEngineering or architecture
• CHealth, law, accounting, actuarial science, performing arts, consulting, athletics, finan…
• DRetail trade

An S corporation makes an S election effective Jan 1, 2026. Five years later it sells appreciated property held since prior C corp years. Under §1374, the built-in gains (BIG) tax applies if:

• AThe disposition occurs within the recognition period of 5 years following the S election…
• BThe disposition occurs at any time after the S election
• COnly if the corporation pays dividends
• DOnly to inventory items

An S corporation has accumulated earnings & profits (AE&P) from prior C-corp years and an accumulated adjustments account (AAA). A distribution from the S corp is generally treated as:

• AAlways tax-free return of capital
• BTax-free first from AAA (to extent of basis), then dividend from AE&P, then return of cap…
• CAlways a dividend
• DAlways ordinary income

A C corporation files Form 1120 and reports book income of $1,000,000. Schedule M-1 reconciles book to taxable income. Which adjustment INCREASES taxable income relative to book income?

• ATax-exempt interest from municipal bonds
• BFederal income tax expense per books
• CDepreciation timing differences (tax MACRS exceeds book straight-line)
• DLife insurance death benefit received on key employee

A C corporation receives a $100,000 dividend from a 25%-owned domestic corporation. The dividends-received deduction (DRD) is:

• A50% — $50,000
• B65% — $65,000
• C100% — $100,000
• D0% — fully taxable

An accrual-basis C corp accrued a bonus of $50,000 on December 31, 2026 to a 60% shareholder-employee. The bonus was paid March 30, 2027. The deduction is:

• A$50,000 in 2026
• BDeferred to 2027 because §267(a)(2) defers deductions for accruals to a related cash-basi…
• C$50,000 in both years
• DDisallowed permanently

An accumulated earnings tax under §531 may apply to a C corporation that:

• AIs publicly traded
• BAccumulates earnings beyond reasonable business needs to avoid shareholder-level tax
• CHas any retained earnings
• DIs an S corporation