Individual Tax Compliance Planning

TCP — Individual Tax Compliance & Planning Exam: CPA — TCP (Tax Compliance & Planning Discipline) Last Updated: June 2026 --- ## Overview The TCP Discipline tests advanced individual tax concepts beyond the REG Core level. Expect complex planning scenarios, multi-year tax effects, and integrated questions combining multiple tax areas. --- ## Advanced Income Inclusion and Exclusion ### Forgiveness of Indebtedness General rule: Discharge of debt = ordinary income. Exceptions (excluded from income): - Bankruptcy discharge - Insolvency (excludes up to the amount of insolvency) - Qualified principal residence indebtedness (through end of most recently extended exclusion period) - Agricultural debt forgiven by qualifying farm lenders - Student loan discharge for public service (PSLF) Basis reduction: If debt discharge is excluded, taxpayer must reduce basis in certain assets (most favorable basis reduction order is taxpayer's choice: depreciable real property first, then other assets). ### Stock Options — Advanced Incentive Stock Options (ISOs): - No ordinary income at grant or exercise - Spread at exercise = AMT preference item - Qualifying disposition (held 2 years from grant, 1 year from exercise): Long-term capital gain - Disqualifying disposition: Ordinary income = spread at exercise (or lesser gain) Non-Qualified Stock Options (NQSOs): - No income at grant - Ordinary income at exercise = FMV − exercise price - Basis in stock = FMV at exercise ### Annuities Exclusion ratio = Investment in contract / Expected return Each payment: Taxable = Payment × (1 − Exclusion ratio) After basis is fully recovered, 100% of payments are taxable. --- ## Advanced Deduction Planning ### Business Use of Home — §280A Exclusive and regular use test must be met. Home office deduction is limited to…