Tax Law I

Most Tax Law I exams combine multiple-choice items with constructed-response problems that require a written analysis. The multiple-choice portion rewards precise rule recall; the written portion rewards issue spotting, correct authority, and clean computation. Ask your instructor or program administrator for the exact mix and weighting used in your course.

Difficulty is moderate to high because questions combine doctrine with arithmetic and a single missed step in basis or character can change the answer. Passing standards are set by the administering program, not by any central authority; the official body publishes the current figure, so check its site rather than relying on secondhand numbers.

Timing is set by the administering program, which publishes the current figure on its site. As a working rule, budget multiple-choice items at roughly a minute each and reserve a third of the clock for constructed-response problems, where computation and explanation take longer than recognition.

Retake rules vary by program and are published by the administering body; check its site for the current policy on waiting periods, fees, and any limit on attempts. Treat a retake as a diagnostic opportunity: identify whether the loss came from doctrine, computation speed, or misreading the call of the question.

Start with authority hierarchy and research method, then gross income, then deductions. Those three build the vocabulary everything else uses. Move to basis and nonrecognition, then capital character and recapture, then accounting method and timing, and finish with individual filing mechanics and Circular 230, which are largely self-contained.

Three patterns dominate. First, confusing deductions under a trade-or-business provision with those for production of income, which changes the floor and the itemized treatment. Second, computing basis without adjusting for improvements, depreciation allowed, or boot. Third, answering the call of the question with a conclusion and no authority or computation.

You need to recognize the pivotal sections by number and know what they do, not recite them verbatim. Examiners reward candidates who cite the operative provision and explain its elements. In open-book settings, the skill being tested is locating and applying authority quickly, so practice with an index.

Enough that calculator fluency matters. Basis, realized and recognized gain, depreciation recapture, capital loss limitation, and the standard deduction and credit phase-outs all require clean computation. Show your work in constructed-response answers so partial credit is possible when a final figure is wrong.

It depends on the program; some permit the Code and regulations, others do not. The administering body publishes the current rule. Even when open book, prepare as if closed book, because time spent searching during the exam is time not spent analyzing.

It supplies the professional-responsibility overlay: who may practice, what diligence and competence require, rules on contingent fees and advertising, and the standards for advising on positions that lack substantial authority. Expect questions framed as short fact patterns asking whether the practitioner's conduct was permissible.