TCP CPA ACTUAL EXAM QUESTIONS WITH ANSWERS
2025/2026 GRADED A+
Restricted Stock - EE receives actual shares of the ER stock
EE restricted to see until vesting date with restrictions lapse
EE Taxation Restricted Stock - EE recognizes ordinary compensation income for the
FMV of stock on the day it vests and the restrictions lapserestictions
EE basis in stock is the FMV of the vesting date and EE's holding period for the stock
begins on the vesting date
*has option to elect to recognize ordinary compensation income for the FMV of stock on
the grant date
Imputed Interest - Excess of... interest based on the applicable federal rate (AFR)
published regularly by the IRS over any interest actually payable on the loan
Taxpayer - interest income (makes) & may deduct if not personal interest (receives)
Loans Subject to Imputed Interest Rules - Gift Loans
Compensation - Related Loans
Corporation - Shareholder Loans
Tax-Avoidance Loans
Loans to Qualified Continuing Care Facilities
Foreign Income Exclusion - up to $126,500 income earned while residing in a foreign
country
Qualifications:
1. Bona Fide Residence Test - uninterrupted period that6 includes the entire taxable
year
2. Physical Presence Test - Physically present for 330 full days during any 12
consecutive month period.
Alternative Minimum Taxable Income Equation (AMT) - *Pay if more than taxpayer's
regular tax liability
Regular taxable income
+/- Adjustments
+ Tax preferences
=
Alternative Minimum Taxable Income (AMTI)
Adjustments to get to AMTI - PANIC
Passive activity losses are added back or recalc
Accelerated depreciation- real property - difference bw regular and SL 40 years
- personal property - difference bw regulate and 150% declining
, Net operating loss must be recomputed
Installment method may not be used for property sales
Contracts (LT) difference bw % of completion and completed contract method
Taxes- itemized deductions are added back
Standard deduction is added back
Tax Preferences to get to AMTI - PPP
Private activity bond tax-exempt interest income
Percentage depletion deduction (excess over adjusted basis of property)
Pre-1987 accelerated depreciation on real property and leased personal property
Kiddie Tax - taxed at parent's rate
total unearned income - $2,600
Flexible Spending Accounts (FSA) - allows an EE to receive a pretax reimbursement for
qualified medical expenses and/or qualified dependent care expenses
funded through voluntary salary reduction agreement & ER may contribute
funds should be used within year or 3 1/2 month grace period or only roll over $640
Health Savings Account (HSA) - tax-deferred savings account that allows a taxpayer to
set aside money on a pre-tax basis to pay for qualified medical expenses
funds accumulate year to year
contribution limit $4,150 individual and $8,300 family; increase $1,000 for tax payers
ages 55 or older
Estimated Tax Payments - 90% current year's tax
OF
100% prior year's tax (110% if AGI>$150,000)
Tax Basis Limitation - loss can only be flowed through to the owner's individual income
tax return and deducted to the extent of the owner's tax basis (investment in ownership
interest, adjusted for items such as income, deduction, distributions, and debt)
excess loss is suspended until tax basis reinstated and carried forward indefinitely
When dispose of entity, and suspended loss is lost
At-Risk Limitation - loss can only be flowed through to the owner's individual income tax
return and deducted to the extent that the owner is at risk (economic risk excluding
owner's share of non recourse debt other than qualified non recourse financing)
Excess loss is suspended until at risk basis is reinstate and carried forward indefinitely
When dispose of entity, suspended loss can offset against any gain from selling the
interest
2025/2026 GRADED A+
Restricted Stock - EE receives actual shares of the ER stock
EE restricted to see until vesting date with restrictions lapse
EE Taxation Restricted Stock - EE recognizes ordinary compensation income for the
FMV of stock on the day it vests and the restrictions lapserestictions
EE basis in stock is the FMV of the vesting date and EE's holding period for the stock
begins on the vesting date
*has option to elect to recognize ordinary compensation income for the FMV of stock on
the grant date
Imputed Interest - Excess of... interest based on the applicable federal rate (AFR)
published regularly by the IRS over any interest actually payable on the loan
Taxpayer - interest income (makes) & may deduct if not personal interest (receives)
Loans Subject to Imputed Interest Rules - Gift Loans
Compensation - Related Loans
Corporation - Shareholder Loans
Tax-Avoidance Loans
Loans to Qualified Continuing Care Facilities
Foreign Income Exclusion - up to $126,500 income earned while residing in a foreign
country
Qualifications:
1. Bona Fide Residence Test - uninterrupted period that6 includes the entire taxable
year
2. Physical Presence Test - Physically present for 330 full days during any 12
consecutive month period.
Alternative Minimum Taxable Income Equation (AMT) - *Pay if more than taxpayer's
regular tax liability
Regular taxable income
+/- Adjustments
+ Tax preferences
=
Alternative Minimum Taxable Income (AMTI)
Adjustments to get to AMTI - PANIC
Passive activity losses are added back or recalc
Accelerated depreciation- real property - difference bw regular and SL 40 years
- personal property - difference bw regulate and 150% declining
, Net operating loss must be recomputed
Installment method may not be used for property sales
Contracts (LT) difference bw % of completion and completed contract method
Taxes- itemized deductions are added back
Standard deduction is added back
Tax Preferences to get to AMTI - PPP
Private activity bond tax-exempt interest income
Percentage depletion deduction (excess over adjusted basis of property)
Pre-1987 accelerated depreciation on real property and leased personal property
Kiddie Tax - taxed at parent's rate
total unearned income - $2,600
Flexible Spending Accounts (FSA) - allows an EE to receive a pretax reimbursement for
qualified medical expenses and/or qualified dependent care expenses
funded through voluntary salary reduction agreement & ER may contribute
funds should be used within year or 3 1/2 month grace period or only roll over $640
Health Savings Account (HSA) - tax-deferred savings account that allows a taxpayer to
set aside money on a pre-tax basis to pay for qualified medical expenses
funds accumulate year to year
contribution limit $4,150 individual and $8,300 family; increase $1,000 for tax payers
ages 55 or older
Estimated Tax Payments - 90% current year's tax
OF
100% prior year's tax (110% if AGI>$150,000)
Tax Basis Limitation - loss can only be flowed through to the owner's individual income
tax return and deducted to the extent of the owner's tax basis (investment in ownership
interest, adjusted for items such as income, deduction, distributions, and debt)
excess loss is suspended until tax basis reinstated and carried forward indefinitely
When dispose of entity, and suspended loss is lost
At-Risk Limitation - loss can only be flowed through to the owner's individual income tax
return and deducted to the extent that the owner is at risk (economic risk excluding
owner's share of non recourse debt other than qualified non recourse financing)
Excess loss is suspended until at risk basis is reinstate and carried forward indefinitely
When dispose of entity, suspended loss can offset against any gain from selling the
interest
