TCP STUDY GUIDE EXAM QUESTIONS WITH ANSWERS
2025/2026 GRADED A+
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
Passive Activity Loss (PAL) Limitation - Passive when taxpayer does not materially
participate (operations; <500 hours)
PAL can only offset passive activity income
PAL suspended is carried forward indefinitely to offset future passive activity income
When dispose of activity, suspended PAL can offset against active, passive, or portfolio
income
Passive - business income/loss without material participation; rental real estate;
Income/loss for a limited partner from limited partnership
*$25,000 allowance and decrease by 50% of AGI over $100,000 until $150,000 AGI and
no deduction
Excess Business Loss Limitation - $610,000 for MFJ and $305,000 for all others
threshold
Combined business loss for the year in excess of threshold is carried forward as an
NOL
Unified Transfer Tax System - Federal Gift Tax and Estate Tax are merged into one
based on cumulative taxable gifts to others made during their lifetime and transfer of
property at death
Unlimited Gift Tax Exclusion - 1. Payments made directly to an Education Institution
2. Payments made directly to a Health Care Provider for Medical Care
3. Charitable Gifts
4. Martial Deduction - between spouses
Future Interest Gifts - Reversions (gifting assets and later getting the property back)
Remainders (distributed at some future time)
2025/2026 GRADED A+
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
Passive Activity Loss (PAL) Limitation - Passive when taxpayer does not materially
participate (operations; <500 hours)
PAL can only offset passive activity income
PAL suspended is carried forward indefinitely to offset future passive activity income
When dispose of activity, suspended PAL can offset against active, passive, or portfolio
income
Passive - business income/loss without material participation; rental real estate;
Income/loss for a limited partner from limited partnership
*$25,000 allowance and decrease by 50% of AGI over $100,000 until $150,000 AGI and
no deduction
Excess Business Loss Limitation - $610,000 for MFJ and $305,000 for all others
threshold
Combined business loss for the year in excess of threshold is carried forward as an
NOL
Unified Transfer Tax System - Federal Gift Tax and Estate Tax are merged into one
based on cumulative taxable gifts to others made during their lifetime and transfer of
property at death
Unlimited Gift Tax Exclusion - 1. Payments made directly to an Education Institution
2. Payments made directly to a Health Care Provider for Medical Care
3. Charitable Gifts
4. Martial Deduction - between spouses
Future Interest Gifts - Reversions (gifting assets and later getting the property back)
Remainders (distributed at some future time)
