TCP, Tax Compliance and Planning

Sources for Tax Compliance and Planning Core

Last reviewed 2026-10-06

The standards and authorities behind PocketCPA's TCP lessons on Tax Compliance and Planning Core.

About this topic

TCP asks a candidate to compute a number and then say what kind of number it is. It is a discipline section: advanced individual and entity tax compliance and planning.

The section is arithmetic. Almost nothing on it is answered by naming a rule. It is answered by running a computation to a number and then labeling that number correctly.

Key points

• The annual gift tax exclusion is per donee, per year, separate from and applied before the lifetime exemption.
• Gift splitting allows a married couple to treat a gift by one spouse as made half by each, doubling the exclusion.
• The generation-skipping transfer tax applies to transfers that skip a generation, using the same exemption amount as the estate tax.
• The unified credit shelters a cumulative amount of taxable gifts and estate transfers from tax over a lifetime.

What the lessons cover

1. Like-kind exchanges (Sec. 1031)
2. Nonrecognition on formation
3. Transfer taxes: the gift annual exclusion
4. Related-party transactions (Sec. 267)
5. Basis of acquired property: cost, carryover, stepped-up, and spousal transfers
6. Involuntary conversions and wash sales (Secs. 1033 and 1091)
7. The principal residence exclusion and small business stock (Secs. 121, 1202, 1244)
8. Capital gain and loss: netting, character, and carryovers (Secs. 1211, 1212, 1222)
9. Section 1231 and depreciation recapture (Secs. 1231, 1245, 1250, 291)
10. Cost recovery: MACRS, Sec. 179, bonus depreciation, and Sec. 197
11. The loss limitation ladder (Secs. 704(d), 465, 469, 461(l))
12. Partnership formation, outside basis, and liabilities (Secs. 721, 722, 723, 705, 752)
13. Partnership operations: separately stated items, allocations, and payments to partners (Secs. 702, 704, 707)
14. Partnership distributions (Secs. 731, 732, 733, 751)
15. The Sec. 754 election: Secs. 743(b) and 734(b)
16. Partnership continuation and termination (Sec. 708)
17. Corporate liquidations (Secs. 331, 336, 332, 337, 334)
18. Corporate reorganizations (Sec. 368)
19. Related-party sales of depreciable property and installment resales (Secs. 1239 and 453(e))
20. Below-market loans (Sec. 7872)
21. Gift splitting, qualified transfers, and the transfer tax computation (Secs. 2513 and 2503(e))
22. Generation-skipping transfers (Sec. 2612)

Authoritative references

Like-kind exchanges, involuntary conversions, and wash sales:

• Sec. 1031(a), (b), (c) and (d), nonrecognition on the exchange of real property held for productive use or investment, the boot rule, the deferred exchange timing at (a)(3), and the basis of property received; (f) and (g) cover related-party exchanges and the treatment of the exchange of property for a principal residence.
• Sec. 1033(a), (b) and (g), the nonrecognition of gain on an involuntary conversion where proceeds are reinvested within the replacement period, the basis of the replacement property, and the special rules for condemnation of real property.
• Sec. 1091(a), (b), (d) and (e), the disallowance of a loss on a wash sale within 30 days before or after, and the basis and holding period of the replacement stock.

Formation, transfers to related parties, and basis:

• Sec. 351(a), (b), (d) and (g), the transfer to a controlled corporation, the treatment of boot, the transfer for services, and nonqualified preferred stock; Sec. 357(a), (b) and (c), the assumption of liabilities and its exceptions; Sec. 358(a)(1) and Sec. 362(a), the basis of the stock and of the property.
• Sec. 721(a) and (b), Sec. 722 and Sec. 723, the contribution to a partnership and the basis of the interest and of the property.
• Sec. 267(a), (b), (c) and (d), the disallowance of losses between related parties, the constructive ownership rules, and the treatment of the buyer's later gain.
• Sec. 1012(a) and (b), Sec. 1014(a) and (b), Sec. 1015(a), (d) and (e), Sec. 1016, Sec. 1041(a) through (e) and Sec. 102(a) and (b), the cost basis, the basis of property acquired from a decedent, the carryover basis of a gift and the adjustment for gift tax paid, the adjusted basis, the transfer between spouses or incident to divorce, and the exclusion of gifts and inheritances.

Gain exclusions and character:

• Sec. 121(a), (b), (c) and (d), the exclusion of gain on the sale of a principal residence, the $250,000 and $500,000 limits, the reduced maximum, and the special rules for spouses, death, and nonqualified use.
• Sec. 1202(a), (b) and (d), the exclusion of gain on qualified small business stock, and Sec. 1244(a) through (c), ordinary loss on small business stock.
• Sec. 1(h), the maximum rates on net capital gain and qualified dividends, with Sec. 1(h)(1)(E) and (F), the 25 percent rate on unrecaptured Sec. 1250 gain and the 28 percent rate on collectibles gain.
• Sec. 1211(a) and (b), Sec. 1212(a) and (b), Sec. 1222 and Sec. 1223, the limitation on capital losses, the carryover, the definitions of short-term and long-term gain and loss, and the holding period.
• Sec. 1231(a), (b) and (c), the netting of gains and losses on property used in the trade or business and the recapture of net Sec. 1231 losses; Sec. 1245(a) and (b), Sec. 1250(a) and (b) and Sec. 291(a)(1), depreciation recapture; Sec. 1256, the mark-to-market of regulated futures contracts.
• Sec. 1239(a), (b), (c) and (e), ordinary income on a sale of depreciable property between related parties, and Sec. 453(e)(1) through (e)(5), the second disposition by a related buyer.

Cost recovery:

• Sec. 168(b), (c), (d), (e) and (g), the accelerated cost recovery system, the recovery periods and conventions, and the alternative depreciation system, with Sec. 168(k), the additional first-year depreciation.
• Sec. 179(a) and (b), the election to expense, its dollar limit, and the phase-out at (b)(2); Sec. 280F(a), (b) and (d), the limits on listed property and passenger automobiles; Sec. 197(a), (b), (c) and (d), the amortization of acquired intangibles over 15 years.

The loss limitation ladder:

• Sec. 704(d), Sec. 465(a) and (b), Sec. 469(a), (b), (c), (g) and (i), and Sec. 461(l), the basis, at-risk, passive activity, and excess business loss limits, applied in that order; see the references of the passive activity and at-risk unit for the full pinpoints.

Partnerships:

• Sec. 702(a)(1) through (a)(8) and (b), separately stated items and the character of the partner's share; Sec. 703(a), the partnership's taxable income; Sec. 704(a), (b) and (c), allocations and the allocation of built-in gain or loss on contributed property; Sec. 705(a), the adjustments to basis; Sec. 707(a) and (b) and Sec. 707(c), payments to a partner and guaranteed payments; Sec. 752(a) through (c), partnership liabilities.
• Sec. 731(a) and (b), Sec. 732(a) and (b), Sec. 733 and Sec. 751(a) through (d), the recognition of gain or loss on a distribution, the basis of distributed property and of the remaining interest, and the hot asset rules.
• Sec. 754, Sec. 743(a) and (b), Sec. 734(a) and (b) and Sec. 755, the optional adjustment to the basis of partnership property and its allocation; Sec. 742, the basis of an interest acquired by sale.
• Sec. 708(a) and (b), the continuation of a partnership, and its technical termination.

Corporate liquidations and reorganizations:

• Sec. 331(a) and (b), Sec. 336(a), (b) and (d), Sec. 332(a) and (b), Sec. 337(a) and (b) and Sec. 334(a) and (b), gain or loss on a complete liquidation at the shareholder and corporate levels, the liquidation of an 80 percent subsidiary, and the basis of property received; Sec. 1504(a)(2), the 80 percent test.
• Sec. 368(a)(1) and (a)(2) and Sec. 368(c), the definition of a reorganization and of control; Sec. 354, the exchange of stock and securities.

Transfer taxes and below-market loans:

• Sec. 7872(a) through (f), the treatment of below-market loans as a loan at the applicable federal rate with a deemed transfer, including the gift loan limits at (c)(2) and the compensation-related and corporation-shareholder loans at (c)(1).
• Sec. 2503(b), (c) and (e), the annual exclusion, the exclusion for a transfer to a minor, and the exclusion for tuition and medical payments paid directly; Sec. 2513(a), gift splitting by spouses.
• Sec. 2612(c), the definition of a direct skip for the generation-skipping transfer tax.

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.

See also

• Sources for every TCP topic
• Free TCP sample questions
• The CPA exam glossary