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CPA TCP Practice Exam 2
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Comprehensive practice exam for the CPA Tax Compliance and Planning (TCP) discipline. This exam covers complex individual and entity tax compliance, planning strategies, and property transactions, aligned with the 2026 AICPA Blueprints.
68
Questions
Hard
Difficulty
75%
Pass mark
Difficulty breakdown
Easy(3)
Medium(47)
Hard(18)
Topics covered
Browse all topics →Area I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea I: Individual Compliance and PlanningArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea II: Entity Tax ComplianceArea III: Entity Tax PlanningArea III: Entity Tax PlanningArea III: Entity Tax PlanningArea III: Entity Tax PlanningArea III: Entity Tax PlanningArea III: Entity Tax PlanningArea IV: Property TransactionsArea IV: Property TransactionsArea IV: Property TransactionsArea IV: Property TransactionsArea IV: Property TransactionsArea IV: Property TransactionsArea IV: Property TransactionsArea IV: Property TransactionsArea IV: Property TransactionsArea IV: Property TransactionsArea IV: Property Transactions
Sample questions
Q01Medium1 mark
In Year 1, an executive receives an Incentive Stock Option (ISO) to purchase 1,000 shares of stock at $10 per share (FMV at grant). In Year 2, when the stock FMV is $25, the executive exercises the option. In Year 3, the executive sells the stock for $35 per share. Assume the executive meets all holding period requirements for ISO treatment. What are the tax consequences in Year 2?
Q02Medium1 mark
A taxpayer is calculating their Alternative Minimum Tax (AMT) liability for Year 1. They claimed a standard deduction of $27,700 (married filing jointly) and received $2,000 in tax-exempt interest from private activity bonds issued in Year 1. They also exercised ISOs creating a spread of $10,000. Which of the following correctly describes the adjustments to reach Alternative Minimum Taxable Income (AMTI)?
Q03Hard1 mark
On January 1, Year 1, a corporation lends $500,000 to a shareholder at a 0% interest rate. The Applicable Federal Rate (AFR) is 4%. The loan is a demand loan. The shareholder uses the funds for personal investment. What are the tax consequences to the corporation in Year 1?
Q04Medium1 mark
A U.S. citizen accepts a permanent assignment in France on January 1, Year 1. In Year 1, they earn $140,000 in salary. The maximum Foreign Earned Income Exclusion (FEIE) for Year 1 is $120,000 (stated for this scenario). They also pay $15,000 in French income taxes allocable to the excluded income. If the taxpayer elects the FEIE, what is the impact on their Foreign Tax Credit (FTC)?
Q05Medium1 mark
A 12-year-old child has $5,000 of interest income and no earned income in Year 1. The standard deduction for a dependent with no earned income is $1,250 (stated). The next $1,250 is taxed at the child's rate. Any remaining unearned income is taxed at the parents' marginal rate. If the parents' marginal rate is 37% and the child's rate is 10%, what is the child's tax liability?
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All questions (68)
Free to browse · no sign-up requiredQ01In Year 1, an executive receives an Incentive Stock Option (ISO) to purchase 1,000 shares of stock at $10 per share (...MediumQ02A taxpayer is calculating their Alternative Minimum Tax (AMT) liability for Year 1. They claimed a standard deduction...MediumQ03On January 1, Year 1, a corporation lends $500,000 to a shareholder at a 0% interest rate. The Applicable Federal Rat...HardQ04A U.S. citizen accepts a permanent assignment in France on January 1, Year 1. In Year 1, they earn $140,000 in salary...MediumQ05A 12-year-old child has $5,000 of interest income and no earned income in Year 1. The standard deduction for a depend...MediumQ06A taxpayer expects their marginal tax rate to increase from 24% in Year 1 to 35% in Year 2. They have a $10,000 deduc...MediumQ07In Year 1, a taxpayer invests $100,000 in a passive activity. They have an at-risk amount of $80,000. In Year 1, the ...HardQ08A taxpayer owns three rental real estate properties. Properties A and B generate losses; Property C generates income....HardQ09A taxpayer gifts $100,000 cash to their child in Year 1. The annual gift tax exclusion for Year 1 is $18,000 (stated)...MediumQ10A wealthy client wants to reduce their taxable estate by gifting assets to their children. They have two assets of eq...HardQ11A taxpayer, age 45, is in the 37% marginal tax bracket and expects to be in the 22% bracket in retirement. They have ...MediumQ12A C Corporation has a net operating loss (NOL) carryforward of $100,000 arising from Year 1 (post-TCJA). In Year 2, t...MediumQ13A C Corporation distributes land to its sole shareholder as a nonliquidating distribution. The land has a Fair Market...MediumQ14Parent Corp owns 100% of Sub Corp. They file a consolidated return. In Year 1, Parent sells land to Sub for $500,000 ...HardQ15A U.S. C Corporation owns 100% of a Foreign Subsidiary. The Foreign Subsidiary earns $100,000 of 'Subpart F income' (...MediumQ16An S Corporation shareholder has a stock basis of $10,000 and a debt basis of $0 at the beginning of Year 1. In Year ...HardQ17An S Corporation was formerly a C Corporation and has Accumulated Earnings and Profits (AEP) of $20,000. It has an Ac...MediumQ18Partner A contributes land to a partnership in exchange for a 50% interest. The land has a basis of $80,000 and an FM...MediumQ19A partnership distributes cash of $10,000 and property with an adjusted basis of $20,000 (FMV $25,000) to a partner i...MediumQ20Partner X sells their 1/3 interest in a partnership to Buyer Y for $100,000. The partnership has assets with a basis ...HardQ21A complex trust has Distributable Net Income (DNI) of $40,000 (all taxable). The trust instrument requires a distribu...HardQ22A §501(c)(3) tax-exempt university operates a coffee shop open to the public. The shop generates $50,000 in net incom...MediumQ23A taxpayer exchanges a business building (Adjusted Basis $100,000, FMV $200,000) for a new business building (FMV $18...MediumQ24A business sells a machine for $50,000. The machine was purchased for $40,000 and had accumulated depreciation of $15...MediumQ25In Year 1, a taxpayer has a net §1231 gain of $20,000. In the previous five years, the taxpayer had the following net...MediumQ26A taxpayer sells property to their adult child for $40,000. The taxpayer's basis was $60,000. Two years later, the ch...MediumQ27A taxpayer sells a rental property for $200,000 in Year 1. The basis was $120,000. The buyer pays $50,000 in Year 1 a...MediumQ28A C Corporation is considering liquidating. It has assets with a basis of $100,000 and FMV of $500,000. The sole shar...HardQ29An S Corporation (formerly a C Corp) sells an asset in Year 1 for a gain of $100,000. The asset was held when the S e...HardQ30A taxpayer is forming a new entity with two other partners. They want to contribute appreciated property tax-free, ha...MediumQ31A taxpayer has $50,000 of salary income and a $10,000 loss from a rental real estate activity in which they actively ...MediumQ32A C Corporation distributes a property dividend to a shareholder. The property has an FMV of $100,000 and a basis of ...MediumQ33A taxpayer contributes property (Basis $20,000, FMV $30,000) to a partnership for a 10% interest. Three years later, ...HardQ34A taxpayer holds Qualified Small Business Stock (QSBS) under §1202 acquired in Year 1 (after 2010). They sell it in Y...MediumQ35A taxpayer has a Health Savings Account (HSA). In Year 1, they contribute $3,000. Their employer contributes $1,000. ...MediumQ36A taxpayer donates a painting to a public charity (museum). The painting was purchased 5 years ago for $10,000 and ha...MediumQ37A taxpayer is underpaid on their estimated taxes for Year 1. Their Year 1 tax liability is $50,000. Their Year 0 (pri...MediumQ38A partnership has a §754 election in effect. Partner A sells their interest to Partner B. The partnership's assets ha...HardQ39A taxpayer owns a life insurance policy with a cash surrender value of $50,000 and a face value of $500,000. They hav...MediumQ40A C Corporation has current E&P of $10,000 and accumulated E&P of ($50,000) (deficit). It distributes $20,000 to its ...MediumQ41A taxpayer sells §1245 property (machine) on the installment method. Sale Price: $100,000. Basis: $60,000. Depreciati...HardQ42A U.S. Corporation has a foreign branch. The branch earns $100,000 of income and pays $20,000 in foreign taxes. The U...MediumQ43A taxpayer has a Net Capital Loss of $10,000 in Year 1. They have taxable income of $50,000. How much of the loss can...EasyQ44A C Corporation has a Net Capital Loss of $10,000 in Year 4. In Years 1, 2, and 3, it had Net Capital Gains of $2,000...MediumQ45A taxpayer sells a building (Section 1250 property) for a gain of $100,000. They used straight-line depreciation of $...HardQ46A taxpayer receives a non-qualified stock option (NSO) with a readily ascertainable fair market value at the grant da...MediumQ47A partnership makes a liquidating distribution to Partner J. Partner J's outside basis is $50,000. J receives $10,000...HardQ48A taxpayer owns a vacation home. They rent it out for 100 days and use it personally for 20 days. Gross rental income...MediumQ49A C Corporation incurs $60,000 in organizational expenditures in its first year. What is the maximum deduction in the...MediumQ50A taxpayer exchanges a warehouse (Basis $100,000, FMV $200,000) for a new warehouse (FMV $150,000) and cash of $50,00...MediumQ51A partnership distributes a 'hot asset' (unrealized receivable with Basis $0, FMV $10,000) to a partner in liquidatio...HardQ52A taxpayer is subject to the Net Investment Income Tax (NIIT). Their MAGI is $250,000 (Threshold $200,000). They have...MediumQ53A C Corporation makes a charitable contribution of $20,000. Its taxable income before the contribution, dividends rec...MediumQ54A taxpayer sells stock to their brother for $5,000. The basis was $8,000. The brother sells the stock to an unrelated...HardQ55A partnership agreement allocates 10% of income to Partner A. However, the partnership agreement states that if the p...HardQ56An S Corporation distributes appreciated property (FMV $100,000, Basis $20,000) to its sole shareholder. The sharehol...MediumQ57A taxpayer has a $50,000 passive loss from a rental activity in Year 1. They have $20,000 of passive income from a li...MediumQ58A taxpayer is the grantor of a trust. The trust generates $10,000 of income. The trustee retains the income in the tr...MediumQ59A taxpayer has a $100,000 loss from a business activity. They materially participate in the activity. Their 'at-risk'...MediumQ60A taxpayer sells their principal residence for a $600,000 gain. They are single and have lived there for 5 years. Wha...EasyQ61A partnership has 3 partners. Partner A (50%), Partner B (25%), Partner C (25%). Partner A uses a calendar year. Part...MediumQ62A taxpayer receives a gift of stock. Donor's Basis: $10,000. FMV at Gift: $8,000. Taxpayer sells the stock for $9,000...MediumQ63A C Corporation has $100,000 of taxable income. It owns 25% of another domestic corporation and receives a $10,000 di...EasyQ64A taxpayer has a $20,000 loss from a rental activity (active participation). AGI is $140,000. What is the deductible ...MediumQ65A partnership pays a guaranteed payment of $20,000 to a partner for services. The partnership has $50,000 of ordinary...MediumQ66A taxpayer has $5,000 of foreign source income and $95,000 of U.S. source income. Total Taxable Income = $100,000. U....MediumQ67A taxpayer contributes $5,000 to a 529 Plan in Year 1. The state offers a tax deduction. In Year 3, the account is wo...MediumQ68A taxpayer owns a bond with a face value of $1,000 and a 5% coupon. They bought it for $900 (market discount). They h...Medium