What REG tests
REG blends memorization with application. Candidates need to know tax rules, but they also need to apply those rules to facts involving individuals, entities, property, professional responsibilities, and business law.
REG study guide
REG CPA Exam Study Guide for 2026.
REG is rule-heavy, but the exam still rewards application. You need tax memory, business law basics, and a habit of tying facts to rules.
Last reviewed June 5, 2026. World of Accountants is independent and not affiliated with the AICPA, NASBA, Becker, NINJA, UWorld, Gleim, or other CPA review providers.
How to study it
Keep a running rule list. When you miss a question, write the rule in plain English and rework a similar question before moving to the next topic.
High-value topics
Individual income tax, entity taxation, basis, property transactions, tax procedure, professional responsibilities, contracts, agency, debtor-creditor relationships, and business structures.
Practice plan
Start with a focused REG set, review every missed explanation, bookmark weak items, then retest those topics later in the week.
REG topic guides
Use these REG topic pages before your next practice set.
REGBasis explained for REG CPA candidates
The tax scorecard behind gain, loss, deductions, distributions, and depreciation.
REGTax basis for REG CPA candidatesAdjusted basis, property basis, entity basis, distributions, and loss-limit logic.
REGLike-kind exchanges for REG CPA candidatesReal-property nonrecognition, boot, deferred exchange facts, and carryover basis.
Sample questions
Try a few REG examples before opening the full bank.
These are real questions from the current beta bank. The practice app includes more questions, filters, explanations, bookmarks, and progress tracking.
While preparing a client tax file, an employee receives wages for services performed during the year. How are the wages generally treated for federal tax purposes?
- A.The wages are included in gross income unless a specific exclusion applies.
- B.The wages are excluded because they were earned through labor
- C.The wages are deferred until the employee spends the cash
- D.Only half of the wages are taxable
Answer: A. The wages are included in gross income unless a specific exclusion applies.
The wages are included in gross income unless a specific exclusion applies.
Why the other answers are wrong
- B. The choice "The wages are excluded because they were earned through labor" misses the issue because compensation for services is generally taxable.
- C. The choice "The wages are deferred until the employee spends the cash" misses the issue because taxation is not based on when the cash is spent.
- D. The choice "Only half of the wages are taxable" misses the issue because there is no general rule taxing only half of wages.
While preparing a client tax file, a taxpayer sells property for more than adjusted basis. What is the general tax result?
- A.Loss is recognized because the property was sold
- B.Gain is recognized as amount realized minus adjusted basis unless a nonrecognition rule applies.
- C.No tax effect occurs until replacement property is purchased
- D.The entire sales price is taxable income
Answer: B. Gain is recognized as amount realized minus adjusted basis unless a nonrecognition rule applies.
Gain is recognized as amount realized minus adjusted basis unless a nonrecognition rule applies.
Why the other answers are wrong
- A. The choice "Loss is recognized because the property was sold" misses the issue because a sale above basis creates gain, not loss.
- C. The choice "No tax effect occurs until replacement property is purchased" misses the issue because gain is generally recognized unless a specific nonrecognition rule applies.
- D. The choice "The entire sales price is taxable income" misses the issue because basis is recovered before measuring gain.
While preparing a client tax file, a cash-basis taxpayer pays a deductible business expense by credit card before year-end. When is the expense generally deductible?
- A.Only when the taxpayer later pays the credit card bill
- B.Only when the related revenue is collected
- C.It is generally deductible in the year charged if the expense is otherwise deductible.
- D.Never, because credit cards are debt
Answer: C. It is generally deductible in the year charged if the expense is otherwise deductible.
It is generally deductible in the year charged if the expense is otherwise deductible.
Why the other answers are wrong
- A. The choice "Only when the taxpayer later pays the credit card bill" misses the issue because credit card charges are generally treated as payment for cash-basis taxpayers.
- B. The choice "Only when the related revenue is collected" misses the issue because cash-basis deductions are not matched this way.
- D. The choice "Never, because credit cards are debt" misses the issue because using credit does not automatically deny a deduction.
While preparing a client tax file, a taxpayer omits a substantial amount of gross income from a filed return. What may happen to the IRS assessment period?
- A.The IRS assessment period is always shortened
- B.The return is automatically treated as never filed
- C.The taxpayer automatically avoids penalties
- D.The assessment period may be extended beyond the normal period.
Answer: D. The assessment period may be extended beyond the normal period.
The assessment period may be extended beyond the normal period.
Why the other answers are wrong
- A. The choice "The IRS assessment period is always shortened" misses the issue because substantial omissions can extend the period.
- B. The choice "The return is automatically treated as never filed" misses the issue because an omission does not necessarily mean no return was filed.
- C. The choice "The taxpayer automatically avoids penalties" misses the issue because omissions can increase exposure rather than remove it.
While preparing a client tax file, a client asks whether a tax credit is better than an equal-dollar deduction. Which explanation is most accurate?
- A.A credit reduces tax liability dollar for dollar, while a deduction reduces taxable income.
- B.A deduction always reduces tax more than a credit
- C.A credit reduces taxable income but not tax liability
- D.Credits and deductions have identical effects
Answer: A. A credit reduces tax liability dollar for dollar, while a deduction reduces taxable income.
A credit reduces tax liability dollar for dollar, while a deduction reduces taxable income.
Why the other answers are wrong
- B. The choice "A deduction always reduces tax more than a credit" misses the issue because an equal-dollar credit usually has a more direct tax effect.
- C. The choice "A credit reduces taxable income but not tax liability" misses the issue because that describes a deduction more closely.
- D. The choice "Credits and deductions have identical effects" misses the issue because they affect different parts of the tax calculation.
While preparing a client tax file, a partner receives a Schedule K-1 reporting charitable contributions separately. How is the item generally handled?
- A.The partnership deducts it and the partner ignores it
- B.The item flows through to the partner and is reported according to its character.
- C.It is always taxable income to the partner
- D.It disappears because partnerships are not taxpayers
Answer: B. The item flows through to the partner and is reported according to its character.
The item flows through to the partner and is reported according to its character.
Why the other answers are wrong
- A. The choice "The partnership deducts it and the partner ignores it" misses the issue because separately stated items retain character to partners.
- C. The choice "It is always taxable income to the partner" misses the issue because charitable contributions are not income merely because reported on a K-1.
- D. The choice "It disappears because partnerships are not taxpayers" misses the issue because flow-through treatment still requires partner-level reporting.
While preparing a client tax file, a shareholder transfers property to a corporation solely for stock and has control immediately after the exchange. Which rule may apply?
- A.The shareholder always recognizes all built-in gain
- B.The corporation always recognizes income equal to the property value
- C.Nonrecognition may apply if the statutory control and exchange requirements are met.
- D.The transfer is ignored for basis purposes
Answer: C. Nonrecognition may apply if the statutory control and exchange requirements are met.
Nonrecognition may apply if the statutory control and exchange requirements are met.
Why the other answers are wrong
- A. The choice "The shareholder always recognizes all built-in gain" misses the issue because certain controlled-corporation transfers can qualify for nonrecognition.
- B. The choice "The corporation always recognizes income equal to the property value" misses the issue because receipt of contributed property for stock is not generally income.
- D. The choice "The transfer is ignored for basis purposes" misses the issue because basis consequences still must be determined.
While preparing a client tax file, an agent signs a contract within actual authority granted by a disclosed principal. Who is generally bound by the authorized act?
- A.Only the agent is bound in every case
- B.No one is bound unless the contract says "agency"
- C.The third party is bound but the principal is not
- D.The principal is generally bound by the agent's authorized act.
Answer: D. The principal is generally bound by the agent's authorized act.
The principal is generally bound by the agent's authorized act.
Why the other answers are wrong
- A. The choice "Only the agent is bound in every case" misses the issue because authorized acts for a disclosed principal generally bind the principal.
- B. The choice "No one is bound unless the contract says "agency"" misses the issue because actual authority can bind the principal even without that label.
- C. The choice "The third party is bound but the principal is not" misses the issue because the principal is the party represented by the agent.
Next step