What CPA Regulation actually tests
REG is a Core section (required for every candidate):
| Area | What it covers |
|---|---|
| Ethics & Professional Responsibilities | Circular 230, AICPA Statements on Standards for Tax Services |
| Federal Individual Income Tax | Gross income, deductions, credits, QBI deduction (§199A), AMT |
| Property Transactions | Capital gains/losses, like-kind exchanges (§1031), basis determination |
| Business Entity Taxation | Sole proprietorships, partnerships, S corps, C corps |
| Corporate Distributions | Dividends (E&P), stock redemptions, liquidations |
| Estate & Gift Tax | Annual exclusion, unified credit, portability |
| Business Law | Contracts, agency, bankruptcy, secured transactions |
| Federal Securities Law | Securities Act 1933, Securities Exchange Act 1934, SOX |
Why capital gains treatment is worth mastering as a decision tree
The recurring skill REG tests isn't computing a gain — it's correctly classifying the transaction first (short-term vs. long-term, capital vs. ordinary, §1231 vs. §1245 recapture) before any tax rate gets applied. Misclassifying the transaction, not miscalculating the gain itself, is the most common source of lost marks.
Sample question: Capital Gains Tax
Regulation · Medium difficulty
An individual sells stock for $30,000 that was purchased 3 years ago for $18,000. Assuming a long-term capital gains rate of 15%, what is the tax owed on this transaction?
A. $1,200
B. $1,800
C. $3,000
D. $4,500
The correct answer is B — $1,800.
Gain = Sale proceeds − Basis = $30,000 − $18,000 = $12,000. Since the stock was held more than one year, it qualifies for long-term capital gains treatment: $12,000 × 15% = $1,800. Held for one year or less, the same $12,000 gain would instead be taxed at ordinary income rates — usually a meaningfully higher rate.
Gain = Sale proceeds − Basis = $30,000 − $18,000 = $12,000. Since the stock was held more than one year, it qualifies for long-term capital gains treatment: $12,000 × 15% = $1,800. Held for one year or less, the same $12,000 gain would instead be taxed at ordinary income rates — usually a meaningfully higher rate.