TCP, Tax Compliance and Planning
Sources for Personal Financial Planning at Tax-Planning Altitude
Last reviewed
The standards and authorities behind PocketCPA's TCP lessons on Personal Financial Planning at Tax-Planning Altitude. The topic rests on IRC Sec. 62(a)(19), 72, 101, 170, 213, 219, 223, 401(a)(9), 402(g), 402A, 408, 408A, 414(v), 529, 530, 1014, 1015, 2010, 2035, 2042, 2503, 2513, 2523, 4973, 4974.
About this topic
A tax return reports a transaction that has already happened. A tax plan chooses among transactions that have not happened yet, and every alternative on the table is lawful. That is the altitude this Topic works at. Each provision here is a lever on one of four decisions: which account holds a dollar, when the dollar moves, who receives it, and what form it takes on arrival.
The examiner cares because the arithmetic is small and the money is not. A simulation supplies a household, a set of balances and a set of statutory limits, and a candidate who computes every item correctly can still lose the points by taking the items in the wrong order. Several of these provisions consume the same capacity or shrink each other's base, so sequencing is the tested skill.
Key points
- Retirement plan contributions reduce current taxable income; distributions are taxed as ordinary income (traditional) or tax-free (Roth).
- Required minimum distributions (RMDs) begin at age 73 and are calculated using the Uniform Lifetime Table.
- Education savings vehicles (529 plans, Coverdell ESAs) grow tax-free when used for qualified expenses.
- Charitable giving strategies include bunching deductions, donating appreciated property, and qualified charitable distributions from IRAs.
What the lessons cover
- Retirement account architecture
- Education funding
- Insurance and risk transfer
- Charitable and transfer-tax interplay
- Basis at transfer: carryover for gifts, step-up at death
- The charitable deduction: ceilings, the 0.5 percent floor and the qualified charitable distribution
- Required minimum distributions and the payout sequence
- Health savings accounts as a planning asset
- Substantiation, appraisals, and the property-type haircuts
- Putting the pieces together
Authoritative references
Retirement accounts:
- Sec. 401(a)(9), the required minimum distribution rules, including the required beginning date at (a)(9)(C), the post-death rules at (a)(9)(B), and the special rules at (a)(9)(H); Sec. 4974(a), the excise tax on a shortfall.
- Sec. 401(k) and Sec. 402(g), the cash or deferred arrangement and the limit on the exclusion for elective deferrals, with the catch-up contributions of Sec. 414(v).
- Sec. 402A(d), the tax treatment of distributions from a designated Roth account.
- Sec. 219(a), (g) and (c), the IRA deduction, its reduction for an active participant in an employer plan, and the contribution limit; Sec. 408(d), (o) and (a)(6), the tax treatment of distributions, nondeductible contributions, and the required distribution rules applied to IRAs.
- Sec. 408A(c) and (d), the Roth IRA contribution rules and the qualified distribution rules, including the five-year rule at (d)(2)(B).
- Sec. 72(t), the 10 percent additional tax on early distributions and its exceptions; Sec. 72(b), (c) and (e), the exclusion ratio, annuity and amount-not-received-as-an-annuity rules.
- Sec. 4973(a), the excise tax on excess contributions.
- Sec. 403 and Sec. 416, other plan types and the top-heavy rules cross-referenced in the required distribution provisions.
Education funding:
- Sec. 529(c) and (e)(3), the tax treatment of distributions from a qualified tuition program and the definition of qualified higher education expenses, with the expanded elementary and secondary expenses and the postsecondary credentialing expenses of Sec. 529(f) added by Pub. L. 119-21, Sec. 70413 and Sec. 70414.
- Sec. 530(b) and (d), the Coverdell education savings account and its distributions.
- Sec. 25A(b), (c) and (d), the American Opportunity and Lifetime Learning credits and their phase-out, with the rules at (g) and (i).
Insurance and risk transfer:
- Sec. 101(a), (c) and (d), the exclusion of life insurance proceeds, with its exceptions, and the treatment of installment payouts.
- Sec. 1035(a), the tax-free exchange of insurance contracts.
- Sec. 2042, the inclusion of life insurance proceeds in the gross estate, and Sec. 2035(a), the three-year rule for transfers of incidents of ownership.
- Sec. 213(a), the medical expense deduction above 7.5 percent of adjusted gross income.
Charitable and transfer-tax interplay:
- Sec. 170(b)(1) and (d), the percentage limitations on charitable contributions by type of property and type of donee, the carryover, and the 60 percent cash ceiling made permanent by Pub. L. 119-21, Sec. 70425.
- Sec. 170(e)(1), the reduction of the deduction for certain appreciated property.
- Sec. 170(p), the deduction for taxpayers who do not itemize, and Sec. 509(a)(3) and Sec. 4966(d)(2), the supporting organization and donor-advised fund definitions.
- Sec. 2010(c), the applicable exclusion amount, made permanent by Pub. L. 119-21, Sec. 70106, for estates of decedents dying and gifts made after December 31, 2025.
- Sec. 2503(b) and (e), the annual exclusion and the exclusion for tuition and medical expenses paid directly.
- Sec. 2513 and Sec. 2523, gift splitting by spouses and the marital deduction for gifts.
- Sec. 1014(a)(1) and Sec. 1015(a), the basis of property acquired from a decedent and the carryover basis of a gift.
Health savings accounts:
- Sec. 223(a), (b) and (c), the deduction, the annual limitation, and eligible individuals, including the high-deductible health plan at (c)(2).
- Sec. 223(f), the tax treatment of distributions, and Sec. 62(a)(19), the deduction as an adjustment to gross income.
How PocketCPA uses these sources
Every lesson is written in original words and cites the paragraph each rule comes from. No standard's text is reproduced. How lessons and questions are written and checked is set out in our methodology.