Advising the Individual Taxpayer

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Special Enrollment Examination

Part 1SEE Part 1: Individuals✓Part 2SEE Part 2: Businesses Part 3SEE Part 3: Representation, Practices and Procedures

Planning questions in which the candidate picks the best advice: timing income and deductions, using basis and holding-period rules, choosing between joint and separate returns, handling divorce and community property, education and retirement planning, amending returns and spouse relief. The rules are covered elsewhere in Part 1; this domain tests whether you can apply them to a client's choice.

Advising the Individual Taxpayer6 min read7 sections

Must-know for the exam

Inherited property steps up to FMV at death; gifted property keeps the donor's basis, so built-in gain is better left to pass at death (IRC 1014(a), 1015(a); Pub. 551 (2025)).
Transfers between spouses or incident to divorce produce no gain or loss; the recipient takes the transferor's basis (IRC 1041; Pub. 504 (2025)).
Joint filers are jointly and severally liable; relief from that liability is requested on Form 8857 (IRC 6013(d)(3), 6015; Pub. 971).
Innocent spouse and separation of liability requests are due within 2 years after the IRS first begins collection against the requesting spouse (IRC 6015(b)(1)(E), (c)(3)(B)).
A refund claim is due within 3 years from filing or 2 years from payment, whichever is later; early returns are treated as filed on the due date (IRC 6511(a), 6513(a)).
Post-2017 NOLs carry forward indefinitely and offset only 80% of taxable income figured without the NOL (IRC 172(a)(2); Pub. 536 (2025)).
A 529 plan open over 15 years may roll to the beneficiary's Roth within the annual IRA limit, up to $35,000 lifetime (IRC 529(c)(3)(E); Pub. 970 (2025)).
Coverdell contributions are capped at $2,000 per beneficiary per year in total (IRC 530(b)(1)(A)(iii); Pub. 970 (2025)).
Wage withholding is treated as paid evenly through the year, so late-year extra withholding can cure earlier underpayments (IRC 6654(g)(1); Form 2210 instructions (2025)).
Keep records 3 years generally, 6 years for a 25% income omission, 7 years for worthless securities or bad debts (IRC 6511(d)(1); Pub. 17 (2025)).

On this page · 7 sections

Traps that cost marks

Assuming a gift gives the donee a fair-market-value basis.
Treating a divorce property transfer as a sale.
Assuming every Sun Belt or West Coast state is a community property state.
Assuming a divorce decree allocating tax binds the IRS.
Thinking MFS returns lose all itemized deductions.
Using the 3-year assessment period.
Choosing the earlier of the two periods.
Thinking the preparer's signature shifts responsibility from the taxpayer.

Why it matters on the exam

Domain 5 items read like client meetings: a taxpayer describes a plan and you choose the advice that saves tax legally or avoids a problem. Most answers turn on a rule you already know from income, basis or filing status, applied forward in time.

Read each option for a hidden rule break: a wash sale only matters for losses, an extension never extends the time to pay, and a gift never steps up basis.

Timing and character

•Defer income legitimately: a cash-method taxpayer can bill in late December so payment first becomes available in January. A check received in December is December income (Treas. Reg. 1.451-2(a)).
•Bunch deductions: pay two years of charitable gifts in one year (for example through a donor-advised fund) to clear the $31,500 joint standard deduction, then take the standard deduction the next year.
•Harvest 0% gains: a single filer with $30,000 of taxable income can realize $15,000 of long-term gain at 0% because the total stays under $48,350 (Rev. Proc. 2024-40 sec. 3.03). The wash sale rule does not stop an immediate repurchase after a gain.
•Wait for long-term: stock bought February 10, 2025 is long-term if sold on or after February 11, 2026.
•Spread a gain: the installment method reports gain as principal is collected; a related-party resale within 2 years accelerates it (IRC 453(e)).
•Personal-use losses: a loss on a personal car is not deductible (IRC 165(c)).

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← Previous note: Taxation: AMT, Self-Employment Tax and Other Taxes All study notes

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Advising the Individual Taxpayer

Advising the Individual Taxpayer6 min read7 sections

Must-know for the exam

Inherited property steps up to FMV at death; gifted property keeps the donor's basis, so built-in gain is better left to pass at death (IRC 1014(a), 1015(a); Pub. 551 (2025)).
Transfers between spouses or incident to divorce produce no gain or loss; the recipient takes the transferor's basis (IRC 1041; Pub. 504 (2025)).
Joint filers are jointly and severally liable; relief from that liability is requested on Form 8857 (IRC 6013(d)(3), 6015; Pub. 971).
Innocent spouse and separation of liability requests are due within 2 years after the IRS first begins collection against the requesting spouse (IRC 6015(b)(1)(E), (c)(3)(B)).
A refund claim is due within 3 years from filing or 2 years from payment, whichever is later; early returns are treated as filed on the due date (IRC 6511(a), 6513(a)).
Post-2017 NOLs carry forward indefinitely and offset only 80% of taxable income figured without the NOL (IRC 172(a)(2); Pub. 536 (2025)).
A 529 plan open over 15 years may roll to the beneficiary's Roth within the annual IRA limit, up to $35,000 lifetime (IRC 529(c)(3)(E); Pub. 970 (2025)).
Coverdell contributions are capped at $2,000 per beneficiary per year in total (IRC 530(b)(1)(A)(iii); Pub. 970 (2025)).
Wage withholding is treated as paid evenly through the year, so late-year extra withholding can cure earlier underpayments (IRC 6654(g)(1); Form 2210 instructions (2025)).
Keep records 3 years generally, 6 years for a 25% income omission, 7 years for worthless securities or bad debts (IRC 6511(d)(1); Pub. 17 (2025)).

On this page · 7 sections

Traps that cost marks

Assuming a gift gives the donee a fair-market-value basis.
Treating a divorce property transfer as a sale.
Assuming every Sun Belt or West Coast state is a community property state.
Assuming a divorce decree allocating tax binds the IRS.
Thinking MFS returns lose all itemized deductions.
Using the 3-year assessment period.
Choosing the earlier of the two periods.
Thinking the preparer's signature shifts responsibility from the taxpayer.

Why it matters on the exam

Read each option for a hidden rule break: a wash sale only matters for losses, an extension never extends the time to pay, and a gift never steps up basis.

Timing and character

•Defer income legitimately: a cash-method taxpayer can bill in late December so payment first becomes available in January. A check received in December is December income (Treas. Reg. 1.451-2(a)).
•Bunch deductions: pay two years of charitable gifts in one year (for example through a donor-advised fund) to clear the $31,500 joint standard deduction, then take the standard deduction the next year.
•Harvest 0% gains: a single filer with $30,000 of taxable income can realize $15,000 of long-term gain at 0% because the total stays under $48,350 (Rev. Proc. 2024-40 sec. 3.03). The wash sale rule does not stop an immediate repurchase after a gain.
•Wait for long-term: stock bought February 10, 2025 is long-term if sold on or after February 11, 2026.
•Spread a gain: the installment method reports gain as principal is collected; a related-party resale within 2 years accelerates it (IRC 453(e)).
•Personal-use losses: a loss on a personal car is not deductible (IRC 165(c)).

Premium

Every note. Every question. One pass.

5 more sections of this note are part of Premium.

Every section of every study note
750+ original questions across every outline topic
Full timed practice exams
A worked explanation on every question
Your full mistake bank and weak-area review

Unlock with Premium

From about US$12.42/mo on the Until-you-pass pass (12 months)

Exam-style questions

← Previous note: Taxation: AMT, Self-Employment Tax and Other Taxes All study notes