Taxation on the Uniform CPA Examination is tested in the REG section: five testlets containing 72 multiple-choice questions and 8 task-based simulations, under the Blueprints effective January 1, 2026. This guide maps the tested tax topics, works through supported examples, and flags the logistics you should verify with official sources.
What the CPA Exam tests on taxation
Taxation is tested inside the REG section of the Uniform CPA Examination, under the Blueprints effective January 1, 2026.
If you are preparing for what is sometimes called the CPA taxation examination, the testing you are facing sits inside REG (Taxation and Regulation), one section of the Uniform CPA Examination. The AICPA & CIMA exam resources list REG among the current sections, alongside AUD, FAR, BAR, ISC, and TCP.
The authoritative content source is the CPA Exam Blueprints. The AICPA publishes them typically one to two times per year, and they define the minimum level of knowledge and skills required to qualify for initial licensure. The current Blueprints take effect January 1, 2026, and a summary of changes accompanies them.
Within the Blueprints you will find content organized by Area, Group and Topic with score weighting, sample task statements, skill levels, supporting reference materials, and item-type counts. The overview page does not enumerate REG's full content areas or weights, so download the Blueprints themselves for the complete, official topic list.
Exam format: five testlets of questions and simulations
REG uses five testlets: 72 multiple-choice questions across two testlets and 8 task-based simulations across three.
Every CPA Exam section consists of five testlets. The first two contain multiple-choice questions (MCQs). The next three contain task-based simulations (TBSs), which are case-style problems where you apply rules to documents, computations, or written responses.
Adding up the table below gives REG 72 multiple-choice questions and 8 task-based simulations. The Blueprints also state the score weighting of each item type and the skill level at which tasks are tested. Use those weightings to decide where your study hours go, rather than treating every topic as equal.
Timing and the passing score for REG were not confirmed in the sources retrieved for this guide. Verify both in the current candidate materials on the AICPA & CIMA and NASBA exam pages before you schedule.
| Testlet | Question type | REG items |
|---|---|---|
| Testlet 1 | Multiple-choice questions | 36 |
| Testlet 2 | Multiple-choice questions | 36 |
| Testlet 3 | Task-based simulations | 2 |
| Testlet 4 | Task-based simulations | 3 |
| Testlet 5 | Task-based simulations | 3 |
Which tax law the exam can test
Changes to the Internal Revenue Code and federal taxation regulations become testable in the calendar quarter beginning six months after the change's effective date or enactment date, whichever is later.
This rule matters whenever a new tax act passes: material from a recently enacted change is not testable until that six-month window opens. The AICPA also issues targeted guidance when major legislation affects exam content; a current example is its document on the testing of H.R. 1.
Changes in federal laws outside federal taxation follow their own six-month-after-effective-date rule, and other subjects have separate timelines under the exam's policy on new pronouncements. Once a change becomes testable, previously tested content it replaces is removed from eligibility.
Federal taxation of individuals and entities
Expect tasks that classify activities and apply loss limits, especially the passive activity and at-risk rules in IRS Publication 925.
Individual and entity taxation overlap heavily in this section: individual returns carry business and rental activity, and entity results flow through to owners. One rule cluster worth mastering early is the passive activity limit regime, which Publication 925 explains in detail.
Two baseline rules anchor many exam tasks. First, rental activities are generally passive activities even when the owner materially participates; one significant exception is that a taxpayer who qualifies as a real estate professional and materially participates in the rental activity is not subject to that general rule. Second, work performed as an investor does not count as participation. That excluded work includes studying and reviewing financial statements or reports, preparing or compiling summaries or analyses for your own use, and monitoring finances or operations in a nonmanagerial capacity.
Material participation itself is judged through a set of tests, including hour-based thresholds. Under the test built on 100 hours, participating 100 hours or less during the year means you did not materially participate under that test. Limited partners are generally treated as not materially participating unless specific tests are met.
Try the exercise below to see how these rules interact on a fact pattern.
Practice exercise
Under the passive activity rules in IRS Publication 925, Carla owns an interest in a business activity and logs 180 hours during the year: 40 hours managing operations and 140 hours studying the activity's financial statements and preparing analyses for herself in her capacity as an investor. Assume she does not meet any other material participation test, no one is compensated for managing the activity, and no other individual spent more hours managing it than she did. How many of her hours count toward material participation, and does she materially participate under the 100-hour test?
Show answer
Only the 40 management hours count. The 140 investor hours are excluded, so with 100 hours or less of qualifying participation Carla does not materially participate under the 100-hour test.
Publication 925 excludes investor-capacity work from participation: studying and reviewing financial statements or reports, preparing summaries or analyses of the finances for your own use, and monitoring finances in a nonmanagerial capacity all fall in that category. Only Carla's 40 management hours qualify as participation. Under the 100-hour test, participating 100 hours or less during the year means a taxpayer did not materially participate under that test. A tempting distractor is to count all 180 hours and conclude she passes; the rules foreclose that by defining what counts as participation before the hour thresholds are applied.
Property transactions: what Publication 544 covers
Property transaction questions draw on basis, amount realized, exchange rules, and the character of gain or loss, all laid out in IRS Publication 544.
Publication 544 (for 2025 returns) organizes these topics chapter by chapter and includes worked examples, so it works both as an exam reference and as a study source. Its What's New section also shows how quickly this area moves: recent legislation added qualified production property, placed in service after July 4, 2025, to section 1245 property.
The preparation priorities below follow the publication's own structure. Study each with the underlying rules from the source, not from memory of a summary.
- Basis, adjusted basis, and amount realized for sales and exchanges
- Like-kind exchanges, including deferred exchanges, identification requirements, and qualified intermediary safe harbors
- Involuntary conversions, foreclosures, repossessions, and condemnation rules
- Section 1231 transactions and section 1245 and 1250 recapture, including the ordinary-versus-capital distinction
- Installment sales, gifts, transfers at death, and sales between related persons
- Reporting on Form 8949, Schedule D, and Form 4797
Tax procedures and professional responsibilities
Study Circular 230: it sets mandatory conduct rules for tax professionals practicing before the IRS, and the Office of Professional Responsibility enforces them.
Circular 230 governs practice before the IRS by setting mandatory rules of conduct for tax professionals engaging with the IRS on taxpayers' behalf, including attorneys, certified public accountants, and enrolled agents. It establishes standards of competency, diligence, and other ethical behavior, along with procedures for disciplinary actions.
The IRS's Office of Professional Responsibility holds delegated authority over tax practitioner conduct and discipline. Its jurisdiction also covers appraisers who submit appraisals supporting tax positions and preparers in the IRS's Annual Filing Season Program. Confirmed violations can bring sanctions including censure, suspension from practice, disbarment, and monetary penalties.
Use the quick check below to fix the scope of these rules.
Practice exercise
True or false: the conduct rules in Treasury Department Circular 230 apply only to enrolled agents who represent taxpayers before the IRS.
Show answer
False.
Circular 230 sets mandatory rules of conduct for tax professionals engaging with the IRS on taxpayers' behalf, and it expressly includes attorneys, certified public accountants, and enrolled agents — not only enrolled agents. The Office of Professional Responsibility enforces these rules and can impose sanctions such as censure, suspension from practice, disbarment, and monetary penalties. It also exercises jurisdiction over certain appraisers and Annual Filing Season Program preparers.
Building your study plan
Start from the Blueprints, drill the tax computations, and use the targeted IRS publications for rule details.
The sequence below is preparation advice, not an official requirement. The only authoritative statement of what REG tests is the current Blueprints document itself.
- Download the Blueprints effective January 1, 2026 and note each area's weighting before allocating study time
- Work the sample task statements at the indicated skill levels, not just at recall level
- For the taxation areas, pair your review materials with IRS Publication 544 for property transactions and Publication 925 for passive activity and at-risk rules
- Track the six-month testability window so you study the law version the exam can actually test
- Finish with a timed practice test so moving between multiple-choice testlets and simulations feels routine
Sources: Learn what to study for the CPA Exam | Resources | AICPA & CIMA — Blueprint overview, testlet structure table, and policy on new pronouncements; Publication 544 (2025), Sales and Other Dispositions of Assets | Internal Revenue Service — Chapter topics, What's New section; Publication 925 (2025), Passive Activity and At-Risk Rules | Internal Revenue Service — Material participation tests, participation as an investor, real estate professional
Final checklist
Confirm each item below before you sit for REG.
- I know REG's structure: 72 multiple-choice questions and 8 task-based simulations across five testlets
- I have the Blueprints effective January 1, 2026 and know each area's weighting
- I can apply the passive activity and material participation rules to a fact pattern, including excluded investor hours
- I can work basis, amount realized, and the character of gain or loss for property transactions
- I can explain Circular 230's scope and the sanctions available for violations
- I have verified current timing and score requirements from official candidate materials
Sources
Facts checked:
- Learn what to study for the CPA Exam | Resources | AICPA & CIMA
- Publication 544 (2025), Sales and Other Dispositions of Assets | Internal Revenue Service
- Publication 925 (2025), Passive Activity and At-Risk Rules | Internal Revenue Service
- Office of Professional Responsibility and Circular 230 | Internal Revenue Service