- ➻ by Bryan Kesler, CPA
ABOUT THE AUTHOR:
Bryan Kesler, CPA is a CPA Practice Advisor Top 20 Under 40, Licensed Certified Public Accountant, and founder of Kesler CPA Review, Community and Mentorship Platform.
- ✎ Published
REG has a reputation for being the "rule memorization" section of the CPA exam, and there's truth to that. But the candidates who pass REG aren't the ones who memorize the most rules. They're the ones who build frameworks for how federal tax rules interact with each other.
When I sat for REG, I made the mistake most candidates make: I spent too much time on individual taxation (the stuff that felt familiar) and not enough time on entity taxation (the stuff that felt foreign). Partnership basis calculations, S-corp shareholder basis ordering rules, and C-corp earnings & profits are where most candidates lose points. These topics aren't intuitive. They require practice reps until the patterns click.
The good news: REG has the highest pass rate of the three core sections at roughly ~63% based on 2025 AICPA data. Compare that to FAR at ~42% and AUD at ~48%. The content is learnable if you attack it the right way. And business law, which makes up 10-20% of the exam, is essentially free points if you actually study it.
This guide walks through exactly what REG tests, how to allocate your study time, which review courses work best for REG's specific content, and the mistakes you need to avoid.
⚠ CRITICAL 2026 TAX LAW CHANGE: The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, introduces significant federal tax changes. The AICPA has confirmed that OBBBA provisions with effective dates in 2024 and 2025 become eligible for testing on the REG section starting July 1, 2026.
If you sit for REG before July 2026, the exam tests pre-OBBBA tax law. If you sit after July 2026, you need to know the new provisions. Verify the AICPA's published testing window before you begin studying, and confirm your CPA review course has updated its REG content accordingly.
What's In This Guide
Source: AICPA CPA Exam Blueprints, AICPA Scoring & Pass Rates (2025 data aggregated via UWorld, Surgent, and Gleim).
What Does REG Test?
REG covers two broad domains: federal taxation and business law. The exam is weighted heavily toward entity taxation, which is where most of your study time should go. Here are the five AICPA Blueprint content areas and their approximate weights:
Source: AICPA CPA Exam Blueprints (2026)
Let me break down what each area actually means for your study plan.
Entity Taxation Is the Monster (28-38%)
Area V is the single largest content area on REG and the place where most candidates lose the exam. You need to understand C corporations (E&P calculations, accumulated earnings tax, PHC tax, liquidation consequences), S corporations (shareholder basis with its own ordering rules, built-in gains tax, eligibility requirements), partnerships and LLCs (inside basis vs. outside basis, guaranteed payments, distribution rules, Sec 704(b) allocations, liquidation consequences), and tax-exempt organizations.
Partnership basis alone can take weeks to internalize. You need to be able to trace a partner's basis from initial contribution through adjustments for income/loss, distributions, liability changes, and ultimately liquidation. S-corp shareholder basis has a different ordering sequence (stock basis vs. debt basis) that trips up candidates who assume it works the same as partnership basis.
Individual Taxation (15-25%)
This covers gross income inclusions and exclusions, adjustments and deductions to arrive at taxable income (above-the-line vs. itemized), tax credits, filing status, and the alternative minimum tax. Most candidates find this area more intuitive because they've filed their own taxes. Don't let that familiarity make you overconfident. The exam tests specific rules and edge cases, not general tax sense.
Property Transactions (12-22%)
Basis and holding periods, cost recovery (depreciation under MACRS, Sec 179, bonus depreciation), gains and losses on disposition (Sec 1231/1245/1250 character rules), and nonrecognition transactions like Sec 1031 like-kind exchanges. These topics overlap heavily with entity taxation since contributed and distributed property carry basis consequences. Studying them in sequence helps.
Business Law (10-20%)
Contracts (formation, performance, breach, remedies), agency relationships, business structures (sole proprietorships, partnerships, corporations, LLCs), debtor-creditor relationships (bankruptcy, suretyship), and government regulation of business. This is the most underrated area on REG. It's mostly conceptual with minimal calculations, and candidates who study it pick up easy points. Candidates who skip it leave those points on the table.
Ethics & Tax Procedures (10-20%)
Ethics in tax practice, IRS Circular 230 rules, tax preparer penalties under Sec 6694, licensing and disciplinary systems, federal tax procedures (statute of limitations, assessment, collection, penalties). These are testable and relatively straightforward. Weave them throughout your study plan instead of cramming at the end.
| Area I: Ethics, Professional Responsibilities & Federal Tax Procedures (10-20%) | |
|---|---|
| Ethics and responsibilities in tax practice | Licensing and disciplinary systems |
| Federal tax procedures | Legal duties and responsibilities |
| Area II: Business Law (10-20%) | |
|---|---|
| Contracts | Agency |
| Business structure | Debtor-creditor relationships |
| Government regulation of business | |
| Area III: Federal Taxation of Property Transactions (12-22%) | |
|---|---|
| Basis and holding periods of assets | Cost recovery (depreciation and amortization) |
| Gains and losses on property transactions | Like-kind exchanges and other nonrecognition transactions |
| Area IV: Federal Taxation of Individuals (15-25%) | |
|---|---|
| Gross income (inclusions and exclusions) | Adjustments and deductions to arrive at taxable income |
| Tax credits and penalties | Filing status and exemptions |
| Area V: Federal Taxation of Entities (28-38%) | |
|---|---|
| C Corporations | S Corporations |
| Partnerships and LLCs | Tax-exempt organizations |
Source: AICPA CPA Exam Blueprints (2026)
REG Pass Rate & Difficulty
REG's approximate 2025 pass rate sits around 63%, making it the highest among the three core sections. FAR hovers around 42% and AUD around 48%. That gap tells you something important: REG is more passable, not because it's easy, but because its scope is narrower.
FAR tries to cover the equivalent of six college courses. REG goes deep on two domains: tax and business law. That focus actually helps candidates study more efficiently because you're not constantly context-switching between unrelated topics.
That said, candidates still fail REG for predictable reasons. Entity taxation is a calculation-intensive minefield. Partnership basis alone has probably ended more REG attempts than any other single topic. Candidates who spend all their time on individual tax (because it feels productive) and neglect entity tax (because it feels hard) are playing a dangerous game with a section that weights entities at 28-38%.
The other failure mode: candidates who over-study tax and completely skip business law. At 10-20% of the exam, business law is too significant to ignore, and it's the easiest material on REG.
Tax law changes add another layer. The exam tests based on the tax law in effect for a specific testing window. With the OBBBA provisions becoming testable July 1, 2026, candidates need to verify which year's rules apply to their exam date and confirm their study materials match.
See the latest REG pass rates »
How Long to Study for REG
General CPA exam guidance suggests 300-400 total hours across all four sections. REG typically gets a moderate allocation, sitting between FAR (which needs the most time) and AUD.
For first-time candidates with no tax background, budget 100-120 hours over 8-10 weeks. If you've worked in tax, 80-100 hours over 6-8 weeks is realistic because you already have intuition for individual and entity concepts. Don't get overconfident though. The exam tests specific rules, not general tax sense.
For retakers who scored 60+, plan on 50-80 hours over 4-6 weeks, focusing almost entirely on your weak areas (your score report will tell you exactly where).
Timing Tip: Avoid scheduling REG during tax season (January-April) if you work in public accounting. Your brain will already be running tax calculations 50+ hours a week. Adding REG study on top creates burnout and diminished returns. Schedule REG for May through December if possible.
REG Study Timeline Calculator
Estimate your study timeline based on your background and schedule.
Best Study Order Within REG
The order you attack REG's content areas matters. Studying them in the right sequence builds on prior knowledge and prevents the "I learned this three weeks ago and forgot it" problem. Here's the order I recommend:
Individual Taxation (Weeks 1-2)
Start with the most familiar content. Filing status, gross income inclusions and exclusions, above-the-line vs. below-the-line deductions, credits, AMT. This builds confidence early and gives you a foundation that entity tax builds on.
Entity Taxation (Weeks 3-5)
This is the hardest material and needs the most time. Study partnerships first (they're the most complex), then S-corps, then C-corps. Understanding partnership basis first makes S-corp and C-corp basis easier by comparison. Do not rush this section. If partnership basis doesn't click by the end of week 4, extend here rather than moving on.
Property Transactions (Weeks 5-6)
Basis calculations, Sec 1231/1245/1250 gain characterization, like-kind exchanges, installment sales. These overlap with entity tax concepts (contributed property basis, distributed property basis) so studying them in sequence helps reinforce both areas.
Business Law (Weeks 6-7)
A welcome change of pace from tax calculations. Contracts, agency, debtor-creditor, business structures. Mostly conceptual with minimal math. Focus on pattern recognition: know the elements of contract formation, types of agency, and UCC Article 2 rules.
Ethics & Tax Procedures (Woven Throughout)
Don't save these for the end. Weave them in throughout your study plan. Tax preparer penalties (Sec 6694), Circular 230, AICPA standards. These are easy points if you study them consistently but easy to forget if you cram them.
Simulation Practice (Weeks 4 onward)
REG sims often involve multi-step tax calculations (e.g., "calculate the partner's basis after these 5 transactions"). Start practicing sims by week 4. They test your ability to chain rules together, and you won't be ready for them if you've only done MCQs.
Study Strategy for REG
MCQ volume matters. Aim for 1,000 to 1,500+ MCQs before sitting. Entity taxation and property transactions need the most reps. Your course analytics will tell you where you're weak. Trust the data over your gut feeling.
Build basis calculation cheat sheets. Create a one-page reference for each entity type: partnership basis (initial contribution → adjustments for income/loss → liability changes → distributions → liquidation), S-corp shareholder basis (stock basis vs. debt basis, the ordering rules that trip everyone up), and C-corp E&P (current E&P vs. accumulated E&P, distribution ordering). Recreate these from memory weekly until they're automatic.
Build a property transaction decision tree. When you see a gain or loss question, you need a framework: Is it Sec 1231 property? Is there depreciation recapture under 1245 or 1250? Is it a like-kind exchange under 1031? Can you use the installment method? Having this decision tree memorized prevents you from getting lost in multi-step questions.
Use mnemonics for business law. Create memory aids for contract formation elements (offer, acceptance, consideration, capacity, legality), types of agency relationships, and UCC Article 2 rules. This material is straightforward but easy to mix up under four hours of exam pressure.
OBBBA Study Note: If your exam date falls after July 1, 2026, practice OBBBA-specific questions once your review course releases them. Verify the testing window before you sit. If your course hasn't updated its REG content for OBBBA, that's a red flag.
Simulation practice is non-negotiable. Do at least 40-50 TBS before exam day. REG sims are calculation-heavy and often involve multiple tax forms or schedules. Practice filling in Form 1040 schedules, partnership K-1 allocations, and corporate tax calculations. Many candidates only do MCQs and get blindsided by sims that chain 3-5 calculations together.
For a complete study methodology, see my 21 CPA Exam Study Tips and the Kesler Adaptive Study Funnel Plan.
Best CPA Review Courses for REG
Every major course covers REG, but their strengths vary. Here's how I'd rank them specifically for the REG section based on content depth, question quality, and how well they handle tax-specific study challenges.
Kesler CPA Review
Gamification keeps motivation high during REG's repetitive calculation grind. The mentorship program helps calibrate your time allocation between individual tax, entity tax, and business law, which is the single biggest strategic decision on REG. 8,000+ unique MCQs. Works as a standalone course or supplement alongside any other course via Cross-Platform Mapping. $97/month with a 30-day money-back guarantee.
Surgent CPA Review
Surgent's A.S.A.P. adaptive engine is especially valuable for REG because the section has clearly delineated strong and weak areas for most candidates. If you already know individual tax but struggle with entity tax, Surgent will immediately stop wasting your time on individual tax and funnel you toward partnerships and S-corps. ReadySCORE gives a quantifiable "ready or not" signal. 9,000+ MCQs across all sections. Pricing starts at $799.
Gleim CPA Review
10,000+ MCQs and 1,300+ TBS across all sections. If you want to see every possible partnership basis question and property transaction edge case before exam day, Gleim's volume is unmatched. Premium Pro includes Prep Pal AI for instant answers to specific tax rule questions. Starts at ~$1,250.
Becker CPA Review
Solid question bank with detailed explanations. SkillBuilder adaptive technology helps isolate weak areas within REG. Lectures are long (40-60 min) but thorough on entity taxation. Newt AI assistant can answer specific tax questions 24/7. 9,000+ MCQs. Starts at ~$2,399.
UWorld Roger CPA Review
Roger Philipp and Peter Olinto's teaching styles make dry tax rules more digestible. Shorter lectures (15-30 min) help you stay focused across REG's dense content. SmartPath predictive technology benchmarks your performance against past passers. Good for visual and auditory learners who struggle with textbook-only tax study. Starts at ~$1,699.
For a full side-by-side comparison of all courses, visit the Best CPA Review Courses page or browse the head-to-head comparisons.
Common Mistakes on REG
Click each mistake to mark it as "noted" as you review your study plan.
Under-studying entity taxation. This is the #1 killer. Entity tax is 28-38% of the exam. Partnership basis alone represents 10-15% of your score. If you can't calculate a partner's outside basis from a series of five transactions without notes, you're not ready.
Skipping business law entirely. It's 10-20% of the exam and the easiest material on REG. Candidates who ignore it are throwing away points they could pick up with 10-15 hours of focused study.
Studying what you already know instead of what you don't. It feels productive to hammer individual tax MCQs and get 85% right. It is not productive. Your course analytics show where you're weak. Trust the data and spend time on entity tax, even though it hurts.
Not practicing multi-step simulations. REG sims chain 3-5 calculations together (calculate basis, determine gain, determine character, apply to partner's return). If you've only done MCQs, these will blindside you. Budget time for at least 40-50 TBS before exam day.
Ignoring tax law change windows. If your exam tests 2025 tax law and you studied 2024 materials, you'll get tripped up on provisions that changed. With OBBBA taking effect for testing July 1, 2026, this is more important than ever. Verify the applicable year before you start studying.
Cramming REG during tax season. If you work in public accounting, your brain is already running tax calculations 50+ hours a week from January through April. Adding REG study on top creates burnout and diminished returns. Schedule REG for May through December.
Not building reusable frameworks. Tax rules are too numerous to memorize individually. You need basis flowcharts, property transaction decision trees, and entity comparison charts that organize hundreds of rules into recognizable patterns. Build them, then recreate them from memory until they stick.
Frequently Asked Questions
REG is generally considered easier than FAR. REG's pass rate sits around 63% vs. FAR's ~42%. The key difference: FAR covers a much broader range of material (financial reporting, governmental accounting, NFP, etc.), while REG is narrower but deeper on tax and business law. If you have a tax background, REG will feel significantly more manageable. If you have zero tax experience, entity taxation can feel very challenging, but the narrower scope still works in your favor compared to FAR's breadth.
Aim for 1,000 to 1,500+ MCQs before sitting. Entity taxation and property transactions need the most repetitions. If your course analytics show persistent weakness in partnership basis or S-corp shareholder basis, do additional targeted sets on those topics until your accuracy is consistently above 75%. Volume matters, but targeted volume matters more.
You need a 75 on the CPA exam's 0-to-99 scale. This is not a percentage. A 75 doesn't mean you got 75% of questions right. The score is a weighted combination of your MCQ and TBS performance, adjusted for question difficulty. You can earn partial credit on task-based simulations, so always attempt every part of a sim even if you're unsure.
Most candidates take FAR first because it has the most content and the highest risk of credit expiration (you have 30 months once you pass your first section). REG works well as a second or third section. If you currently work in tax, consider taking REG early while the material is fresh from daily work. Avoid scheduling REG during busy season (January-April) if you're in public accounting. REG is a core section and available year-round through continuous testing, so you have flexibility.
The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, introduces significant tax law changes. The AICPA has confirmed that OBBBA provisions with effective dates in 2024 and 2025 become eligible for testing on REG starting July 1, 2026. If you sit before July 2026, the exam tests pre-OBBBA law. If you sit after, you need the new provisions. Verify with the AICPA's published testing window and confirm your review course has updated its REG materials before your exam date.
Ready to Start Studying for REG?
REG is passable. The candidates who succeed are the ones who allocate their time proportionally to the blueprint weights, build frameworks instead of memorizing individual rules, and don't skip business law.
Your next steps: pick the right CPA review course for your learning style, verify which tax law applies to your exam date, and start with individual taxation before working through entity tax methodically.
If you've already failed REG, read my failure recovery guide for a step-by-step retake plan. And if you want personalized coaching on how to allocate your REG study time, check out Kesler CPA Review's mentorship program.
For the full breakdown of all six CPA exam sections, visit the CPA Exam Format, Sections & Content Guide.
Link Disclaimer: Some links on this page are affiliate links. At no additional cost to you, I may earn a referral fee if you decide to invest in a course. Please only use my links if you feel that I have helped you in your review course decision.
ABOUT THE AUTHOR:
Bryan Kesler, CPA is the founder of Kesler CPA Review & Ultimate CPA Exam Guide which earned him a spot on CPA Practice Advisor's Top 20 Under 40.
He has helped thousands of CPA candidates pass the CPA exam since 2013. You can contact him via email bryan@cpaexamguide.com