REG individual-planning coverage for timing strategies, AMT management, tax-advantaged accounts, and capital-gain planning.
This chapter focuses on planning choices individuals can make to improve tax outcomes across timing, deductions, and preferred accounts. The exam emphasis is strategic: understand why a taxpayer would accelerate, defer, shift, or shelter an item and what tradeoffs follow.
Individual planning questions are strongest when the answer considers both tax savings and constraints. A timing strategy can fail if AMT, phaseouts, account limits, capital-loss limits, or cash-flow needs make the apparent tax move unattractive.
| Planning issue | What to evaluate | Common REG trap |
|---|---|---|
| Deferral or acceleration | Whether the taxpayer benefits from shifting income or deductions across years. | Moving an item without comparing marginal rates and cash-flow needs. |
| AMT exposure | Whether a preference or adjustment changes the planning result. | Optimizing regular tax while increasing AMT. |
| Tax-advantaged account | Eligibility, contribution limits, distribution rules, and tax timing. | Choosing an account solely for current-year deduction value. |
| Gain or loss harvesting | Character, holding period, wash sales, and capital-loss limits. | Realizing a loss without checking whether it can be used. |
| Step | REG question to ask | Planning effect |
|---|---|---|
| 1. Compare tax years | Are marginal rates, deductions, credits, or cash-flow needs different across years? | Deferral and acceleration only help when timing changes the taxpayer’s result. |
| 2. Check limitations and phaseouts | Do AGI limits, account limits, AMT, capital-loss limits, or eligibility rules restrict the strategy? | A planning move may be technically available but economically limited. |
| 3. Preserve character | Is the item ordinary, capital, passive, tax-exempt, deductible, or separately limited? | Character determines whether the planning benefit can actually be used. |
| 4. Evaluate transaction costs and risk | Does the strategy create penalties, liquidity strain, investment risk, or compliance burden? | REG planning is not complete if it ignores non-tax constraints. |
| 5. Choose the strongest alternative | Which option produces the best after-tax result within the taxpayer’s facts? | The exam often asks for the best planning step, not every possible tax move. |
| Checkpoint | Ask before recommending | Planning effect |
|---|---|---|
| Year comparison | Will marginal rates, deductions, credits, AMT, or cash needs differ across years? | Timing strategies work only when shifting items changes the after-tax result. |
| Limitation pressure | Do AGI phaseouts, account limits, capital-loss limits, passive limits, or AMT restrict the benefit? | A strategy can be available but not useful for the taxpayer. |
| Character preservation | Is the item ordinary, capital, passive, tax-exempt, deductible, excluded, or deferred? | Character determines rate, offset, and carryover treatment. |
| Non-tax constraint | Does the strategy create liquidity, investment, penalty, documentation, or administrative risk? | REG planning should not optimize tax while ignoring practical constraints. |
| Best alternative | Which option produces the strongest supported result under the taxpayer’s facts? | Planning questions usually test comparative judgment. |