Study guide
1.2 Format, Scoring, and Skill Levels
AICPA CPA Exam — Regulation REG
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1 Introduction & Exam Overview
1.1 Current Exam Facts 1.2 Format, Scoring, and Skill Levels 1.3 New Pronouncements and OBBBA Testing Policy 1.4 Study Strategy and Task-Based Simulations
2 Circular 230 and Tax Return Preparers
2.1 Practice Before the IRS under Circular 230 2.2 Diligence, Written Advice, Fees, and Records 2.3 Tax Return Preparer Identification and Penalties
3 Licensing, Audits, Appeals, and Disclosure
3.1 State Board Licensing and Disciplinary Systems 3.2 IRS Audits, Appeals, and the Judicial Process 3.3 Substantiation, Disclosure, and FBAR Reporting
4 Penalties, Hierarchy, and Legal Duties
4.1 Taxpayer Penalties 4.2 Tax Law Authoritative Hierarchy 4.3 Common Law Duties, Privilege, and Confidentiality
5 Agency Law
5.1 Authority of Agents and Principals 5.2 Duties and Liabilities of Agents and Principals
6 Contracts
6.1 Contract Formation 6.2 Performance and Discharge 6.3 Breach and Remedies
7 Debtor-Creditor Relationships
7.1 Suretyship, Guarantors, and Debtor-Creditor Rights 7.2 UCC Article 9 Attachment, Perfection, and Priority
8 Employment Taxes and Worker Classification
8.1 Federal Employment Taxes 8.2 Employee versus Independent Contractor
9 Bankruptcy, Health Plans, and FCPA
9.1 Bankruptcy Types and Discharge 9.2 Qualified Health Plans and the ACA 9.3 Foreign Corrupt Practices Act
10 Business Structure under State Law
10.1 Selection, Formation, Operation, and Termination 10.2 Rights, Duties, Obligations, and Authority of Owners and Management
11 Basis of Tangible Assets
11.1 Cost Basis and Conversion from Personal Use 11.2 Gift Basis under §1015 11.3 Inherited Basis under §1014
12 Wash Sales and Intangible Basis
12.1 Wash-Sale Basis Adjustments 12.2 Organization, Start-Up, and Loan Cost Basis
13 Cost Recovery
13.1 MACRS Recovery Periods and Conventions 13.2 Section 179 and Bonus Depreciation 13.3 Amortization of Intangibles
14 Individual Gross Income
14.1 Gross Income Inclusions 14.2 Gross Income Exclusions 14.3 Capital Gains, Holding Period, and Virtual Currency
15 Pass-Through Reporting, AGI, and Deductions
15.1 Reporting Items from Pass-Through Entities 15.2 Adjustments to Arrive at AGI 15.3 Standard versus Itemized Deductions 15.4 Qualified Business Income Deduction §199A
16 Loss Limitations and Filing Status
16.1 Capital Loss Netting and Ordinary Business Loss Limits 16.2 Hobby, Wash-Sale, and Personal-Use Loss Disallowance 16.3 Filing Status and Dependents
17 Tax Computation and Credits
17.1 Regular Tax and Net Investment Income Tax 17.2 Refundable and Nonrefundable Credits 17.3 Estimated Tax and Safe Harbors
18 C Corporations and Book-Tax Differences
18.1 Permanent vs Temporary Differences; Schedules M-1 and M-3 18.2 C Corporation Taxable Income and Special Deductions 18.3 C Corporation NOLs, Capital Losses, Credits, and Tax 18.4 State and Local Tax: Nexus, Allocation, Apportionment
19 S Corporations
19.1 Eligibility and Election 19.2 Ordinary Income, Separately Stated Items, and AAA 19.3 Shareholder Stock and Debt Basis
20 Partnerships, LLCs, and Tax-Exempt Organizations
20.1 Partnership Ordinary Income and Separately Stated Items 20.2 Partner's Outside Basis and Partnership Liabilities 20.3 LLC Tax Classification 20.4 Types of Tax-Exempt Organizations
1.2 Format, Scoring, and Skill Levels
Key Takeaways Explain This Topic AI
REG has five testlets: two MCQ testlets of 36 and three TBS testlets of 2, 3, and 3; MCQs and TBSs each contribute 50% of the scaled score.
An optional standardized 15-minute break after testlet 3 pauses the clock; breaks after other testlets do not (AICPA FAQ; NASBA FAQ).
2026 Blueprint skill mix: Remembering & Understanding 25–35%, Application 35–45%, Analysis 25–35%; Evaluation is not tested on REG.
Official content weights: Area I 10–20%, Area II 15–25%, Area III 5–15%, Area IV 22–32%, Area V 23–33%, with I–II skewing recall and III–V skewing application/analysis.
Pretest MCQs and TBSs are unscored and unidentified; failing candidates receive a Candidate Performance Report comparing them to the just-passing 75–80 band.
Last updated: August 2026
Five testlets, one locked path
REG is not a pool of 80 items you can hop around for four hours. It is five testlets you submit in order. AICPA’s CPA Exam FAQ is the operational rule set: you may answer items inside a testlet in any order, but once a testlet is submitted you cannot return , and you cannot open the next testlet until the prior one is submitted. That lock is why a guessed-and-submitted MCQ testlet cannot be repaired during a later TBS.
The AICPA Blueprint item table for REG is:
- Testlet Item type Count
- 1 MCQ 36
- 2 MCQ 36
- 3 TBS 2
- 4 TBS 3
- 5 TBS 3
- Total 72 MCQ + 8 TBS
You will also see pre-exam confidentiality and launch screens. Those screens are not part of the four-hour content clock in the way the five testlets are; they are still part of the appointment, so arrive early. Prometric will not seat you without the NTS.
Breaks — only the published rule
AICPA’s FAQ and NASBA’s CPA Exam FAQ agree on the break model:
You may take a break between testlets.
After testlet 3 (the first TBS testlet, roughly mid-exam), you are offered a standardized 15-minute break . If you take it, the exam clock stops for 15 minutes and resumes when those 15 minutes expire.
After testlets 1, 2, and 4 , optional breaks are available but the clock keeps running .
NASBA’s wording is that candidates are automatically offered the standardized 15-minute break approximately midway through the section and may accept or decline it; that break does not count against testing time. Do not invent other paused-clock windows. A restroom trip during an MCQ testlet is not a standardized break.
Scoring: 50/50, IRT, pretest, not a percent
For REG (and for AUD, FAR, BAR, and TCP), the reported score is a weighted combination of scaled MCQ and scaled TBS scores at 50% / 50% . ISC is the exception at 60/40; REG is not ISC. Scaled scores use formulas that include correctness and item difficulty. That is why two candidates with the same raw count can land on different reported scores, and why converting “I need 75% of 72 MCQs” is the wrong study math.
Pretest items exist. AICPA’s FAQ states that pretest questions are included on every CPA Exam, may be MCQs or TBSs, exist only to collect data on future operational items, and are not part of your score . AICPA does not publish which items are pretest. Commercial counts of “12 pretest MCQs and 1 pretest TBS” are not an AICPA REG specification you should treat as official. The operational rule is simpler: every item looks live, so every item is live for your purposes.
Scoring is automated. Multiple quality-assurance reviews run before NASBA posts an advisory score. A delayed score is usually a Prometric-to-AICPA file-timing issue against a cutoff, not a secret signal about your performance.
Skill levels — Evaluation is a dash on REG
The 2026 REG Blueprint uses revised Bloom’s Taxonomy. The Summary Blueprint prints these weights:
- Skill REG weight
- Remembering and Understanding 25–35%
- Application 35–45%
- Analysis 25–35%
- Evaluation — (not tested)
Read the dash. Evaluation is not tested on REG. Analysis is the ceiling. The Blueprint then tells you where those skills sit:
Remembering and Understanding is mainly concentrated in Area I and Area II — ethics, Circular 230, tax procedure, and business law. Those areas are the lower end of the skill continuum.
Application and Analysis are primarily tested in Areas III, IV, and V — property transactions, individuals, and entities — because those are the day-to-day preparation and review tasks of a newly licensed CPA.
That mapping should change how you study, not just how you highlight a pie chart. Memorizing the definition of a disclosed vs. undisclosed principal (Area II) is in-blueprint. Memorizing a string of inflation-indexed dollar limits and calling that “Analysis” is not how REG is built (see Section 1.3).
Content areas and official weights
- Area Blueprint title Allocation
- I Ethics, Professional Responsibilities and Federal Tax Procedures 10–20%
- II Business Law 15–25%
- III Federal Taxation of Property Transactions 5–15%
- IV Federal Taxation of Individuals 22–32%
- V Federal Taxation of Entities (including tax preparation) 23–33%
Midpoints of those ranges (15, 20, 10, 27, 28) sum to 100 and are a fair planning split. They are not extra-official precision: the Blueprint publishes ranges, and any one form can sit anywhere inside the range. What you can take to the bank is the rank order . Areas IV and V are the two largest. Area III is the smallest, which does not make basis and cost recovery optional — it makes them a smaller slice that still feeds Application/Analysis items and TBSs.
Area I is Circular 230 and tax-return-preparer rules, state-board licensing, audits/appeals/judicial process, substantiation and disclosure (including FBAR), taxpayer penalties, authoritative hierarchy, and common-law duties/privilege. Area II is agency, contracts, debtor-creditor (including UCC security interests and bankruptcy), specified federal statutes (employment tax, worker classification, ACA health-plan mandates, FCPA, BAPCPA), and business-structure legal characteristics. Area III is basis and cost recovery. Area IV is individual gross income, pass-through reporting on the 1040, AGI vs. from-AGI, loss limits, filing status, and tax/credits/estimates. Area V is book-tax, C corp, S corp, partnership, LLC classification, and tax-exempt types, including tax preparation.
Representative tasks in the Blueprint are examples , not an exhaustive item list. A parenthetical that starts with “e.g.” is illustrative; a parenthetical without “e.g.” is meant as the exhaustive list for that task. The number of printed tasks in a group is not the weight of that group.
Candidate Performance Report
If you do not pass, NASBA makes a Candidate Performance Report available through the score notice (typically within 72 hours of the advisory score). CPRs are only issued for failed sections. The report compares your performance, by content area and by item type, to candidates in the just-passing 75–80 band and labels areas Stronger , Comparable , or Weaker . Those labels do not change the official score. Use them to reweight the next 100 hours: a Weaker Area V plus a Comparable Area I is a signal to spend the next cycle on entities, not to reread Circular 230 for comfort.
Put the 50/50 weights and the IV/V ranges on one page, then practice both item types at /practice/cpa-reg . A candidate who only drills MCQs is studying half the score.