Back to CPA Exam

CPA Exam · Cheat Sheet

TCP — Tax Compliance & Planning (Discipline)

Tip: Use your browser's print function (Ctrl+P / Cmd+P) to save as PDF for offline study.

TCP — Tax Compliance & Planning: CHEAT SHEET

---

INDIVIDUAL INCOME — CUE & ANSWER

|---|---|

---

NET INVESTMENT INCOME TAX (3.8%)

Applies to lesser of:

  • Net investment income, OR
  • MAGI excess over $200K (single) / $250K (MFJ)

Includes: Interest, dividends, capital gains, annuities, rents, royalties Excludes: Wages, SE income, active business income, IRA distributions, Social Security

---

RETIREMENT ACCOUNTS — LIMITS & RULES (2025)

|---|---|---|---|

*Roth IRA: No RMD during owner's lifetime; inherited Roth subject to 10-year rule.

Super catch-up (60–63): 401(k)/403(b) = +$11,250 (in addition to regular catch-up).

Roth vs. Traditional Decision

|---|---|---|

RMD Calculation & Penalty

`` RMD = Account Balance (prior year-end) ÷ IRS Life Expectancy Factor Penalty for missed RMD = 25% of shortfall (10% if corrected timely) `

---

CHARITABLE & ESTATE PLANNING

|---|---|---|

---

AMT — PLANNING TRIGGERS & CREDIT

Common triggers: ISO spread, SALT deduction excess, accelerated depreciation, large LTCG with low other income.

Planning: Time ISO exercises; recognize gains in low-income years; claim AMT credit (§53) for future regular tax offsets.

---

ENTITIES — DISTRIBUTIONS & STRUCTURES

Corporations: E&P & Distributions

Source hierarchy: Current E&P → Accumulated E&P → Return of basis → Capital gain

|---|---|

Constructive dividends: Excessive salary, below-market loans, personal expenses, bargain sales.

S Corp vs. Partnership Planning

|---|---|---|

SituationRule/Answer
Debt forgivenessOrdinary income EXCEPT: bankruptcy, insolvency (up to insolvency amount), qualified principal residence debt, ag debt, PSLF
ISO exerciseNo ordinary income at grant/exercise; spread = AMT preference; holding periods (2yr grant, 1yr exercise) = LTCG; violation = ordinary income on spread
NQSO exerciseOrdinary income = FMV − strike price at exercise; basis in stock = FMV
Annuity taxationExclusion ratio = Investment / Expected return; taxable portion = Payment × (1 − ratio)
Home office lossLimited to gross income from business (cannot create loss); simplified: $5/sqft up to 300 sqft ($1,500 max)
Hobby lossActivity cannot deduct losses if not for profit; 3-of-5 years profitable = presumption of profit motive
Business meals50% deductible; must be ordinary/necessary, directly related, not lavish
EntertainmentGenerally NON-deductible post-TCJA
AccountContribution LimitCatch-Up (50+)RMD Age
401(k)/403(b)/457$23,500+$7,50073
SIMPLE IRA$16,500+$3,50073
Traditional/Roth IRA$7,000+$1,00073*
RothTraditional
Tax treatment of contributionAfter-taxPre-tax (if deductible)
Growth/WithdrawalsTax-freeTaxable
Preferred scenarioHigher rates in retirementLower rates in retirement
Income limits$150K (S) / $236K (MFJ) phase-outNone
Backdoor strategyNon-deductible trad → Roth conversion (watch pro-rata rule on existing trad IRAs)
StrategyKey FeatureBenefit
CRTTransfer assets → income stream → charity remainderDeduction for PV of remainder; income-shifted
QCDIRA direct to charity (age 70½+)Excluded from income; counts toward RMD; up to $105K/year
DAFLump contribution → recommend grants over timeImmediate deduction; timing flexibility
Stepped-up basisInherited property = FMV at death as basisAvoids capital gain on appreciation during lifetime
IRDIncome earned pre-death (e.g., trad IRA, deferred comp)NO stepped-up basis; taxable when received; §691 deduction available
Distribution TypeTax Treatment
From E&PDividend (ordinary income)
Excess over E&P (up to basis)Return of capital (non-taxable; reduces basis)
Excess over basisCapital gain
AdvantageS CorpPartnership
SE tax avoidanceDistributions avoid SE tax (if reasonable salary paid)General partner share = SE income
Allocation flexibilityPro-rata onlySpecial allocations (with substantial economic effect)
Basis treatment of liabilitiesLimited; basis doesn't increaseBasis increases for entity liabilities
---

PARTNERSHIPS — SPECIAL ALLOCATIONS & CONTRIBUTED PROPERTY

Substantial economic effect test (§704(b)): Capital accounts maintained, distributions per balance, deficit restoration/QIO.

§704(c) — Contributed property: Pre-contribution built-in gain/loss allocated to contributor upon sale. Three methods: traditional, traditional with curative, remedial.

---

CONSOLIDATED RETURNS

Affiliate eligibility: Common parent owns ≥ 80% voting AND 80% value of all group members.

Deferred intercompany transactions: Gains/losses deferred until sale to third party, member leaves, or separate returns filed.

---

INTERNATIONAL TAX

FTC limitation: `` (Foreign Source Taxable Income

Aligned to the AICPA CPA Exam Blueprints.

Make this cheat sheet yours

Personalize this sheet — focus it however you study, or build one from the exact questions you keep getting wrong.

Sign up free to create a personalized cheat sheet.