TCP topic guide

Entity tax planning for TCP CPA candidates.

TCP entity planning questions ask more than what the rule says. They ask how entity choice, ownership, distributions, and timing change the tax outcome.

Practice TCP planning questions CPA sections

By World of Accountants editorial team. Last reviewed August 23, 2026. World of Accountants is independent and not affiliated with the AICPA, NASBA, Becker, NINJA, UWorld, Gleim, or other CPA review providers.

TCP sample question

Test the rule before you leave this TCP guide.

Read the topic explanation, then use this real TCP question to check whether the controlling fact is sticking.

TCP-000006TCP-IIEntity taxation and planning

A partner begins with outside basis of $40,000. The partner is allocated 60% of the partnership's $90,000 ordinary income, the partner's share of liabilities increases $15,000, and the partner receives a $30,000 cash distribution. What is ending outside basis?

A.$54,000
B.$64,000
C.$79,000
D.$109,000

Answer: C. $79,000

The basis roll-forward is $40,000 + $54,000 allocated income + $15,000 liability increase - $30,000 cash distribution = $79,000.

Why the other answers are wrong

A. This does not include both the allocated income and the liability increase before subtracting the distribution.
B. This omits one of the stated basis increases or applies the distribution incorrectly.
D. The cash distribution must reduce outside basis under the stated facts.

Core idea

Entity tax planning compares tax consequences across entity types and transactions, including owner-level basis, distribution treatment, compensation, and loss use.

What TCP likes to test

Expect C corporation versus pass-through tradeoffs, S corporation eligibility, partnership allocations, distributions, reasonable compensation, basis planning, and loss limitations.

Common miss

Candidates often focus on the entity tax result without considering the owner-level consequence that follows.

How to practice

Trace the transaction twice: once at the entity level and once at the owner level. Planning answers usually depend on both.

How to use this guide

Turn entity tax planning for tcp cpa candidates into a short practice loop.

Read the core idea first, then answer a small set while the rule is still active in your head. The goal is to see whether you can recognize the tested fact without rereading the guide.

Spot the tested fact

Before choosing an answer, name the one fact that should control the result. TCP questions often become easier once the controlling fact is separated from background detail.

Explain the distractor

When an answer is wrong, say why it is wrong in one sentence. That habit turns answer review into durable exam judgment instead of memorizing a letter.

Retest later

Bookmark misses and revisit them after another study session. A topic is stronger when you can recover it after time has passed.

TCP topic guides

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TCPBasis and loss limitations for TCP CPA candidates

Owner basis, at-risk limits, passive activity limits, suspended losses, and ordering.

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Practice loop

Use the topic, then answer questions while the idea is fresh.

Short practice sets are enough to expose whether the rule is sticking.

Practice TCP planning questions