A comprehensive exploration of how each skill level—Remembering, Understanding, Application, and Analysis—applies to the REG exam tasks, featuring practical examples, diagrams, and strategies for success.
In the REG section of the Uniform CPA Examination, candidates are evaluated based on a range of cognitive skills that align with the American Institute of Certified Public Accountants (AICPA) blueprint. These cognitive skills are grouped into four essential levels: (1) Remembering, (2) Understanding, (3) Application, and (4) Analysis. Each level builds on the one before it, allowing examiners to assess not just a candidate’s ability to recall tax and legal rules but also to apply, interpret, and analyze those rules within various contexts. This section provides in-depth insights into how each skill level is tested, offers illustrative examples of question types, and suggests strategies for effective exam preparation.
Below, you will find a structured discussion of these skills, along with practical examples, relevant case studies, diagrams, and references to other parts of this guide that expand upon these areas. By understanding precisely what these cognitive skills entail, you will be able to tailor your study plan and become more confident in tackling all aspects of the REG exam.
The AICPA breaks down CPA Exam tasks into four broad skill categories:
• Remembering & Understanding
• Application
• Analysis
• (Some CPA sections also include Evaluation, but the emphasis for REG is primarily up to Analysis.)
In the REG exam, each tested topic is allocated a certain distribution across these levels, ensuring that questions measure not only factual knowledge (e.g., definitions, rules) but also problem-solving and critical reasoning (e.g., analyzing an S Corporation’s shareholder distributions, identifying potential ethical violations under Circular 230).
Below is an illustrative (not official) allocation of these skill levels in the REG exam. Please note these percentages can vary over time as the AICPA modifies exam blueprints:
| Skill Level | Approx. Percentage of REG Questions |
|---|---|
| Remembering & Understanding | 25% – 35% |
| Application | 40% – 50% |
| Analysis | 20% – 30% |
These ranges reflect the emphasis on both direct recall and deeper engagement with complex tax and regulatory concepts.
Remembering & Understanding (sometimes combined in official blueprints) focuses on factual recall and the comprehension of fundamental concepts. Under this level, you are expected to be able to:
• Recall definitions, rules, formulas, and guidelines (e.g., recalling the statute of limitations on tax returns).
• Recognize and interpret standard procedures, steps, or instructions (e.g., identifying proper forms for specific tax filings).
• Comprehend the broader theoretical underpinnings of tax and business law (e.g., knowing why certain deductions exist or how a regulation is structured).
In the REG context, typical questions at this level might include:
– Listing permissible items that qualify for the Section 179 expense deduction.
– Identifying the difference between actual vs. apparent authority in an agency relationship.
– Recognizing which U.S. tax court has jurisdiction over a particular tax case.
– Defining basic legal terms, such as “consideration” in a contract or “recourse vs. nonrecourse debt” in a partnership.
Remembering & Understanding questions often appear as straightforward multiple-choice items where a single piece of knowledge is tested. For instance, a question might ask: “Which of the following statements about charitable contribution deductions is true?” Each option targets a distinct rule, requiring direct recall of the guidelines one studied.
If a question reads:
• “Which one of the following is a duty of an agent toward the principal?”
You must recall the enumerated duties of the agent, such as loyalty, obedience, notification, accounting, and care. This question does not require complex calculations; it only tests your knowledge of these duty types.
At the Application level, candidates move beyond recalling a single fact. Instead, they must apply their understanding of rules, definitions, or processes to a given scenario. This may involve:
• Using known formulas or rules in a computation (e.g., calculating self-employment taxes).
• Determining the proper tax treatment of a described event (e.g., whether a certain transaction qualifies as a nontaxable like-kind exchange).
• Selecting and applying the correct standard from multiple possible theories or legal principles (e.g., deciding whether a contract is voidable based on duress or fraud).
In these tasks, the exam typically provides more context, such as a taxpayer’s situation, an entity’s financial data, or a business’s organizational structure. You must work step-by-step to verify which rules are relevant, identify the appropriate solution method, and then apply it.
Consider a question about an individual taxpayer who sold stock at a gain, received a W-2 wage, and had dividend income. You might be asked to compute the total gross income to be reported on Form 1040. You’d need to:
By bridging knowledge with a real tax scenario, Application-level questions ensure you can navigate typical tasks a CPA might face in practice.
Analysis represents a more advanced level of cognitive engagement, requiring the evaluation of multiple data points, reconciling conflicting information, or distinguishing between similar regulations that apply differently based on context. Analysis-level tasks in REG often include:
• Evaluating multiple-choice questions with subtle distinctions in tax treatment (e.g., identifying the most appropriate filing status and relevant tax implications when the taxpayer’s marital situation is complicated).
• Explaining the consequences of interrelated transactions in a consolidated corporate return.
• Identifying potential compliance issues, such as a conflict of interest or a violation of AICPA’s Statements on Standards for Tax Services (SSTS), based on a nuanced fact pattern.
• Recommending a course of action that follows from multiple preceding steps (e.g., analyzing a corporate liquidation scenario and detailing the shareholder’s realized gain or loss).
You may face task-based simulations (TBS) at the Analysis level that integrate data from various exhibits—like a partnership agreement, an IRS notice, or a partial tax return—and require you to trace the correct logic, fill out forms, or choose from multiple possible conclusions.
Suppose you receive a scenario describing a partnership with three partners, each with different recourse and nonrecourse liabilities. One partner contributes property with a built-in gain, while another partner contributes services. The question might ask you to:
This multi-step approach tests not only your memory of basis rules (Remembering & Understanding) but also your ability to apply them (Application) and finally to piece everything together in a single consistent answer (Analysis).
Below is a Mermaid diagram illustrating how these cognitive skills build upon one another in the context of REG exam tasks:
flowchart LR
A["Remembering <br/> & Understanding"] --> B["Application"]
B --> C["Analysis"]
C --> D["REG Exam Mastery"]
• Node A focuses on grasping the fundamental concepts and definitions.
• Node B involves using those concepts in real-world scenarios.
• Node C requires synthesizing multiple elements, evaluating complexities, and making judgments.
• Node D represents the overarching mastery of skills needed to succeed in the REG exam.
As you progress through your study plan and practice multiple-question sets, you will notice how these skill levels intertwine. A single task-based simulation might contain questions that touch on each of these levels in sequence.
You will find, throughout this guide, references to various tax and legal topics—everything from individual gross income (Chapter 14) to advanced entity-level considerations (Chapters 19–21). Each of these chapters relates to different routines and complexities tested in the exam. Below is a quick mapping of how each skill level typically intersects with certain topic areas:
• Remembering & Understanding:
– Federal Tax Procedures (Chapter 5) focusing on audit triggers and penalties.
– Basic Business Law Concepts such as contract formation or agency duties (Chapters 7–8).
– Ethics and Professional Responsibilities references to Circular 230 (Chapter 3).
• Application:
– Applying depreciation methods (Chapter 13) to assets with different recovery periods.
– Calculating the Qualified Business Income Deduction (Chapter 15) based on a given set of data.
– Determining the appropriate filing status and standard vs. itemized deductions for an individual (Chapters 14–15).
• Analysis:
– Deciding how to allocate partnership basis in complex capital structures (Chapter 21).
– Evaluating family-limited partnership strategies or advanced estate planning scenarios (Chapters 25–26).
– Determining whether an S corporation is at risk of losing its status due to excessive passive income (Chapter 20).
It is crucial to note that many topics—from the simplest individual tax forms to an entity’s reorganization mechanics—can be tested at various skill levels depending on how the question is posed.
Bridging the gap between these cognitive levels requires more than memorizing facts. Here are some targeted strategies:
• For Remembering & Understanding:
– Use flashcards or spaced-repetition software to recall definitions and rules.
– Summarize the key points of each chapter in a concise, organized manner.
– Practice short quizzes to confirm your grasp of terminology and fundamental rules.
• For Application:
– Work through practice problems that involve basic calculations or scenario-based tasks.
– Use a step-by-step approach to carefully apply each concept.
– Focus on bridging your knowledge to real-world examples or past experiences.
– Attempt easier task-based simulations that require multiple steps but not deep analysis.
• For Analysis:
– Dive into comprehensive simulations that challenge you to interpret multiple data points.
– Compare and contrast similar concepts, such as different entity formations or different tax treatments for the same transaction.
– Study complex case scenarios that require you to identify key facts, eliminate irrelevant data, and arrive at a reasoned conclusion.
– Engage in study groups where you debate or discuss the best approach to an intricate question.
By applying these strategies systematically, you embed the foundational knowledge deeply and learn to extend it into more advanced reasoning—an indispensable skill for exam success and future professional practice.
One of the best ways to prepare is to step through realistic vignettes that mimic what you will see in the actual exam. Consider these short case examples:
• Ethics and Circular 230 Implementation (Chapters 3–6):
– Scenario: A tax preparer faces potential conflicts of interest when representing a married couple going through divorce.
– Skill Requirements:
(1) Remembering & Understanding – Identify rules in Circular 230 regarding conflicts.
(2) Application – Evaluate whether the facts create an impermissible conflict under these rules.
(3) Analysis – Propose a plan of action consistent with ethical guidelines and best practices.
• Corporate Distributions and E&P (Chapter 19):
– Scenario: A C corporation with accumulated Earnings & Profits (E&P) issues a property distribution to shareholders.
– Skill Requirements:
(1) Remembering & Understanding – Recognize definitions of Current vs. Accumulated E&P.
(2) Application – Calculate the taxable portion of a distribution to the shareholder, taking into account E&P.
(3) Analysis – Evaluate the effect of the distribution on the corporation’s future E&P, and interpret potential repercussions for future distributions.
• Entity Choice for a Start-Up (Chapters 11, 20–24):
– Scenario: An entrepreneur needs to decide whether to set up a partnership, an S corporation, or a single-member LLC.
– Skill Requirements:
(1) Remembering & Understanding – Know the key legal structures and tax rules.
(2) Application – Incorporate the entrepreneur’s financial data into the appropriate forms or hypothetical calculations of tax liability.
(3) Analysis – Weigh the pros, cons, and long-term strategic implications (e.g., possibility of an IPO, exit strategies, or pass-through benefits).
Working through these scenarios in a structured way reveals how the exam might combine or layer the skill levels to test a deeper understanding of material.
Rote Memorization Without Context
– Many candidates focus too heavily on reviewing lists of rules. While memorization is necessary, failing to practice applying or analyzing data can lead to difficulty on the exam’s more complex questions.
Skipping Over Foundational Topics
– Overconfidence in basic areas, such as definitions or broad rules, can be detrimental. Even “easy” recall questions can become stumbling blocks if not properly reviewed.
Insufficient Practice of Task-Based Simulations (TBS)
– Simulations often demand a blend of choosing the correct rule, applying it numerically, and interpreting results. Simply doing multiple-choice questions is not enough to build the analytical muscle required.
Misreading Complex Scenarios
– Analysis-level questions hinge on precise reading comprehension. Missing a detail like “the distribution was partially nonliquidating” can change the entire treatment.
Over- or Under-Allocating Study Time to One Cognitive Skill
– Balancing your time according to the relative weight of skill levels on the exam ensures you are prepared for each type of question you might encounter.
Under the CPA Exam blueprint, the REG section requires a broad array of cognitive abilities, from fundamental recall to nuanced analysis. Understanding how each of these levels manifests in exam questions allows you to shape your study strategy effectively. By consistently cycling through each phase—Remembering & Understanding, Application, and Analysis—you will build a rock-solid skill set that is critical not just for passing the exam but also for excelling in professional practice.
Remember, the objective is not only to pass an exam but to acquire the essential blend of knowledge and judgment that defines a competent CPA. Approach each topic with curiosity, delve into practice scenarios, refine your analytical processes, and cultivate a strategic mindset. This broader perspective will pay dividends in your career, equipping you to handle myriad tax, legal, and regulatory challenges effectively.
Taxation & Regulation (REG) CPA Mocks: 6 Full (1,500 Qs), Harder Than Real! In-Depth & Clear. Crush With Confidence!
Disclaimer: This course is not endorsed by or affiliated with the AICPA, NASBA, or any official CPA Examination authority. All content is for educational and preparatory purposes only.