Ch4. US CPA REG — Federal Taxation & Business Law

REG Overview

REG (Regulation) combines federal taxation (~60%) and business law (~40%).

Key coverage:

Individual federal income tax
Business entity taxation
Property transactions
Contracts and agency law
Secured transactions (UCC Article 9)

Individual Income Tax

Taxable Income Calculation

Gross Income − Above-the-line deductions = AGI

AGI − (Standard or Itemized Deductions) = Taxable Income

2024 Standard Deduction

Filing Status	Standard Deduction
Single	$14,600
Married Filing Jointly (MFJ)	$29,200
Head of Household (HOH)	$21,900

Business Entity Taxation

Entity	Tax Treatment	Key Features
Sole Proprietorship	Pass-through (Schedule C)	Simplest; unlimited liability
Partnership	Pass-through (Form 1065; K-1 to partners)	Flexible profit sharing
S-Corporation	Pass-through (Form 1120S; K-1 to shareholders)	≤100 shareholders; US only
C-Corporation	21% flat rate (double taxation)	Large companies; publicly traded
LLC	Default pass-through (electable)	Most flexible structure

Business Law: Contract Essentials

Four Elements of a Valid Contract

Offer (Offeror makes a proposal)
Acceptance (Offeree agrees to exact terms — mirror image rule)
Consideration (Something of value exchanged by both parties)
Capacity and Legality (Parties able to contract; lawful purpose)

Agency Law

Principal authorizes an Agent to act on their behalf
Principal is liable for agent’s authorized acts (express, implied, or apparent authority)

Secured Transactions (UCC Article 9)

Attachment: Security interest is enforceable against the debtor
Perfection: Security interest is effective against third parties (typically by filing a financing statement)

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