Introduction to Tax Compliance and Planning

Learning Objectives

• Understand the purpose and scope of the TCP discipline section
• Identify the major content areas tested in tax compliance and planning
• Recognize how TCP differs from the core REG section
• Distinguish between individual planning, entity compliance, and transactional topics

What is the TCP Section?

Tax Compliance and Planning is one of three discipline sections introduced under the 2024 CPA Evolution model. TCP is the natural choice for candidates pursuing careers in tax practice — whether in public accounting, corporate tax departments, or tax advisory.

TCP builds on the foundational tax knowledge tested in REG by going deeper into tax planning strategies, complex entity taxation, international tax, and specialized transactions. Where REG tests your ability to compute tax liability, TCP tests your ability to advise clients on minimizing it within the bounds of the law.

Key Areas of the TCP Section

The TCP section is organized around four content areas:

1. Individual and Personal Financial Entity Tax Planning (30-40%) — Compensation planning (equity comp, deferred comp), passive activity and at-risk limitations, wealth transfer and gifting strategies, and retirement and education savings vehicles.

2. Entity Tax Compliance and Planning (30-40%) — Net operating loss utilization, consolidated returns, international tax (GILTI, FDII, Subpart F), owner-entity transactions, advanced basis calculations, and trust and estate taxation.

3. Tax Compliance and Planning for Entity Activities (10-20%) — Entity formation and liquidation (Section 351, 721, 332, 331), tax-free reorganizations, and the tax consequences of structural changes.

4. Tax Compliance and Planning for Property Transactions (10-20%) — Advanced property transaction planning, related party rules, and timing strategies for gain recognition and deferral.

How TCP Differs from REG

While REG covers the fundamentals of federal taxation, TCP expects you to apply tax law strategically:

• REG asks: "What is the gain on sale of this asset?" TCP asks: "How should this transaction be structured to minimize the total tax burden?"
• REG covers basic entity taxation. TCP covers international tax provisions, consolidated returns, and complex owner-entity transactions.
• REG introduces pass-through entities. TCP tests advanced basis calculations, Section 754 elections, and built-in gains tax in depth.

TCP is often chosen by candidates planning to specialize in tax. The planning and advisory skills tested here directly apply to client engagements in public accounting and corporate tax departments.

Key Terms

• GILTI — Global Intangible Low-Taxed Income, a provision requiring U.S. shareholders to include certain income earned by controlled foreign corporations
• Passive activity loss — A loss from a trade or business in which the taxpayer does not materially participate, subject to limitation under Section 469
• Section 199A — The Qualified Business Income deduction, allowing eligible taxpayers to deduct up to 20% of qualified business income from pass-through entities
• DNI — Distributable Net Income, the measure that determines how much of a trust or estate's income is taxable to beneficiaries vs. the entity