How to pass IRS Enrolled Agent - SEE Part 2: Businesses (SEE-2)
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The Special Enrollment Examination Part 2 (Businesses) is the hardest of the three SEE parts, and the one most candidates fail first. It tests whether you can prepare and reason about business returns: partnerships on Form 1065, C corporations on Form 1120, S corporations on Form 1120-S, sole proprietors on Schedule C, and the specialised returns for estates, trusts, exempt organisations, and farms. Passing it, together with Parts 1 and 3, earns the Enrolled Agent credential and the right to represent any taxpayer before the IRS.
It suits tax preparers, bookkeepers, accountants, and finance staff who already handle individual returns and now want unlimited federal representation rights. If you can read a Schedule K-1 and know why a partner's outside basis matters, much of the exam will feel like an extension of work you already do. If business entities are new to you, the gap is real but closable: the material is finite, the forms are public, and the exam reuses the same handful of computations and traps across hundreds of questions.
The exam rewards precise computation and clean distinctions, not memorised definitions. Many questions give you numbers and a scenario and ask for an exact figure, so an answer that is the right idea applied to the wrong basis still scores zero. Other questions plant a distractor that is true for one entity type but false for the one in the stem. Practise on worked problems until the recurring calculations - basis, depreciation, recapture, distributions - are automatic, because that is where the marks are.
SEE-2 rewards exact business-return computation and entity-by-entity precision, especially around basis, depreciation, and how losses and distributions interact with basis.
Difficulty
Advanced
Best for
Tax preparers, bookkeepers, accountants, and finance professionals pursuing the Enrolled Agent credential who want unlimited rights to represent businesses and individuals before the IRS.
Prerequisites
None formally required, but a working grasp of individual taxation (the ground covered by SEE Part 1) makes the business material far easier. Comfort with arithmetic and reading IRS forms is assumed.
100 (85 scored)
Questions
210 min
Time allowed
105 / 130
Pass mark
$317
Exam cost (USD)
290
Practice questions
How this exam thinks
Part 2 frames almost every question as a small computation or a clean either-or distinction, and it punishes the candidate who reasons in generalities. Three habits separate a pass from a fail.
First, the exam is entity-specific. The same fact pattern produces different answers for a partnership, an S corporation, and a C corporation, and the test plants distractors that are correct for the wrong entity. A partner's basis includes a share of partnership liabilities; an S corporation shareholder's basis does not include entity-level debt unless the shareholder lent the money directly. Guaranteed payments exist only in partnerships. The dividends-received deduction belongs to C corporations alone. Before you compute anything, fix in your mind which entity you are in, because the correct rule for the wrong entity is the most common trap on the exam.
Second, the exam tests order of operations and limitations as much as the headline rule. Cost recovery is a sequence: Section 179 first, then bonus depreciation on the reduced basis, then regular MACRS on what remains. The Section 179 deduction is then capped at business taxable income, which can bind before the indexed dollar limit ever applies. A pass-through loss is deductible only up to basis, and basis must be computed before the loss can be claimed. When a question gives you a limitation, the answer almost always turns on applying it in the right order, not on knowing the unlimited figure.
Third, the exam wants the exact number on the exact basis. Bonus depreciation for property placed in service in 2024 is 60 per cent, not 100 per cent; Section 1245 recaptures the lesser of depreciation taken or gain realised, not the whole gain; the dividends-received deduction is a fixed 50, 65, or 100 per cent tier by ownership band, then capped by a taxable-income limit. Read which year the property was placed in service, which figure the limitation runs against, and whether the question wants the tentative amount or the limited amount. The distractors are built from the plausible wrong basis, so naming the right base is half the battle.
What each domain tests and how to study it
The SEE-2 blueprint is split across 3 domains. Weights are the official share of the exam; see the official exam guide for the authoritative breakdown.
What you must be able to do. Choose the right entity for a fact pattern, classify it correctly under the check-the-box rules, and track basis through formation, distributions, and pass-through losses for partnerships, C corporations, and S corporations.
In one sentenceHow the five entity types are taxed and classified, plus the formation, basis, and distribution rules that make a partner, a shareholder, and an S corporation owner each behave differently.
Recall check: answer these from memory first
State the default federal classification of a single-member LLC and a multi-member LLC, and which form changes it.
Contrast Section 721 and Section 351 in one line each, naming the control test that applies to only one of them.
Explain why a guaranteed payment is deductible to the partnership and self-employment income to the partner, and how it differs from a distributive share.
Say how an S corporation shareholder's basis differs from a partner's basis when the entity borrows money.
What it tests. Entity selection and the check-the-box default classification (single-member LLC as disregarded entity, multi-member LLC as partnership) and the elections on Form 8832 and Form 2553. It tests partnership formation under Section 721, a partner's outside basis and distributive share versus distributions, and guaranteed payments. It tests C corporation formation under Section 351, the flat 21 per cent rate, earnings and profits, dividends, and the dividends-received deduction, and it tests S corporation eligibility, the shareholder stock-and-debt basis ordering, and the reasonable-compensation requirement.
How to study it. Build one comparison table across sole proprietorship, partnership, C corporation, S corporation, and LLC covering who is taxed, self-employment exposure, and how losses flow. Then drill the two nonrecognition rules side by side: Section 721 has no control test, Section 351 needs 80 per cent control immediately after. Practise basis tracking until it is mechanical: a partner's basis rises with income and contributions and a share of liabilities, falls with distributions and losses; an S corporation shareholder gets stock basis and separate debt basis, and entity debt does not lift stock basis. Learn the Form 2553 deadline as the 15th day of the third month of the year the election takes effect.
Easy to confuse
Section 721 partnership contribution versus Section 351 corporate contribution. Both defer gain on a contribution of property for an ownership interest, but Section 721 has no control requirement at all, while Section 351 is tax-free only if the transferors as a group control 80 per cent of the corporation immediately after the exchange. The exam plants an 80 per cent control condition on a partnership contribution to see if you import the corporate rule.
A partner's distributive share versus an actual distribution. The distributive share on Schedule K-1 is the partner's taxable slice of partnership income whether or not cash is paid, and it raises outside basis; an actual cash distribution is a separate event that lowers basis and is tax-free until it exceeds basis. The exam treats a cash distribution as if it were the taxable item, when the distributive share is what is taxed.
Form 8832 versus Form 2553. Form 8832 is the check-the-box election that sets an eligible entity's classification (for example, to be taxed as a corporation); Form 2553 elects S corporation status. A timely valid Form 2553 is deemed to also elect corporate classification, so an entity electing S status files only the 2553, not both.
S corporation shareholder basis versus partner outside basis. A partner's outside basis includes a share of partnership liabilities, so partnership debt can support loss deductions; an S corporation shareholder's stock basis does not include entity-level debt, and only debt the shareholder personally lent to the corporation creates separate debt basis. The exam offers a loss deduction that would work for a partner but exceeds an S shareholder's basis.
Worked example from the SEE-2 bank
lock_openFree sampleBusiness Entities and Considerationshard
Halverson Tooling Inc, a newly formed calendar-year C corporation, receives a building from its sole shareholder in exchange for all of its stock in a transaction that qualifies for control under Section 351. The shareholder's adjusted basis in the building is 200,000 dollars and its fair market value is 350,000 dollars. To equalise the deal the corporation also pays the shareholder 60,000 dollars in cash, and the shareholder receives no liabilities relief. How much gain must the shareholder recognise on this exchange?
A0 dollars, because a transfer of property solely to a controlled corporation under Section 351 is fully tax-free to the transferring shareholder regardless of any cash received.
B150,000 dollars, because the entire built-in gain in the building of 350,000 dollars minus 200,000 dollars must be recognised once any cash boot is received.
C60,000 dollars, because gain is recognised to the extent of the 60,000 dollars of cash boot received, which is less than the 150,000 dollar realised gain.check_circle Correct
D90,000 dollars, being the 150,000 dollar realised gain reduced by the 60,000 dollars of cash boot that the shareholder received in the exchange.
Under Section 351, a transferor recognises gain equal to the lesser of the boot received or the realised gain, never the full built-in gain when boot is present. Section 351 gives nonrecognition only for property exchanged solely for stock of a controlled corporation. When the transferor also receives boot such as cash, Section 351(b) requires recognition of gain equal to the lesser of the boot received or the realised gain. Here the realised gain of 150,000 dollars exceeds the 60,000 dollar cash boot, so the recognised gain is the 60,000 dollar boot. No loss may be recognised, and the boot does not turn the whole exchange taxable.
Why A is wrong: It is tempting to treat Section 351 as completely tax-free, but nonrecognition does not extend to boot; cash received is boot that triggers recognised gain, so the answer is not zero.
Why B is wrong: Receiving boot does not strip away all nonrecognition; recognised gain is capped at the boot received, not the full 150,000 dollar realised gain, so this overstates the taxable amount.
Why C is correct: Realised gain is 350,000 minus 200,000, or 150,000 dollars, and Section 351(b) recognises gain equal to the lesser of the boot received (60,000 dollars) or the realised gain, so 60,000 dollars is recognised.
Why D is wrong: Subtracting the boot from the realised gain inverts the rule; Section 351(b) recognises gain equal to the boot itself, not the realised gain net of boot, so 90,000 dollars is the wrong figure.
What you must be able to do. Prepare a business return end to end: compute gross income and cost of goods sold, apply the ordinary-and-necessary deduction standard with its limits, run the full cost-recovery sequence with recapture on disposition, and reconcile book income to taxable income.
In one sentenceThe heart of the exam: income and cost of goods sold, the deduction rules and their limits, MACRS and Section 179 and bonus depreciation with Section 1245 and 1250 recapture, the book-to-tax reconciliation, and employment-tax and worker-classification compliance.
Recall check: answer these from memory first
State the cost-recovery order and the 2024 bonus depreciation rate, then name the limitation that can cap Section 179 before its dollar limit.
Explain what Section 1245 recaptures as ordinary income and how that differs from the treatment of straight-line Section 1250 real property.
Say when a taxpayer must use the accrual method rather than cash, and what the all-events test requires.
List three items commonly added back to book income on Schedule M-1 to reach taxable income.
What it tests. Business gross income, cost of goods sold, and cash versus accrual accounting with constructive receipt and the all-events test. It tests the Section 162 ordinary-and-necessary standard, the 50 per cent meals limit, the disallowance of entertainment, the Section 163(j) business interest limit, and the general business credit on Form 3800. It tests MACRS recovery periods and conventions, Section 179 expensing and its business-income limit, the 2024 bonus depreciation rate, and Section 1245 and 1250 recapture on Form 4797. It tests the Schedule M-1 and M-3 reconciliation, the Schedule L balance sheet, worker classification, and the employment-tax obligations on Forms 941 and 940 with the trust fund recovery penalty.
How to study it. This is the largest domain, so spend the most time here. Make cost recovery a fixed routine: Section 179 first, bonus depreciation on the reduced basis (60 per cent for 2024), then MACRS on the remainder, and check the Section 179 business-income cap before you trust the dollar limit. Drill recapture until it is reflexive: Section 1245 turns the lesser of depreciation taken or gain realised into ordinary income on personal property, while straight-line Section 1250 realty produces unrecaptured Section 1250 gain rather than ordinary recapture. Learn the accrual trigger (inventory as a material income-producing factor) and the all-events test against the cash method. For reconciliation, list the usual Schedule M-1 add-backs: 50 per cent of meals, federal income tax, and book-tax depreciation differences. Keep the worker-classification common-law control test and the trust fund recovery penalty ready as discrete marks.
Easy to confuse
Section 179 expensing versus bonus depreciation. Section 179 is elective, capped by an indexed dollar limit and, more often the binding constraint, by business taxable income, with the excess carried forward; bonus depreciation has no income limit and for 2024 is a fixed 60 per cent of basis. The exam applies them in the wrong order or claims 100 per cent bonus, when 179 comes first and 2024 bonus is 60 per cent.
Section 1245 recapture versus Section 1250 treatment. Section 1245 recaptures the lesser of prior depreciation or realised gain as ordinary income on depreciable personal property; straight-line Section 1250 real property generates no ordinary recapture but leaves unrecaptured Section 1250 gain taxed at up to 25 per cent. The exam offers full-gain recapture or applies 1245 logic to a building.
Cash method versus accrual method. The cash method recognises income when constructively received and deductions when paid; the accrual method uses the all-events test and is required when inventory is a material income-producing factor (subject to the small-business exceptions). The exam lets a cash answer stand for a business that must use accrual because of inventory.
Business meals versus entertainment. Business meals are generally 50 per cent deductible when not lavish and a taxpayer is present; entertainment expenses are wholly nondeductible. The exam pairs a number with a meal-or-entertainment label to see if you apply the 50 per cent limit to entertainment or deduct entertainment in full.
Employee versus independent contractor. Classification turns on the common-law control test - behavioural and financial control and the relationship of the parties - not on a label or a contract. Misclassification exposes the business to back employment taxes and the trust fund recovery penalty, which the exam tests through the consequences, not just the definition.
Worked example from the SEE-2 bank
lock_openFree sampleBusiness Tax Preparationhard
Marlowe Fabrication LLC, a calendar-year business, buys and places in service a single new metal lathe (7-year MACRS property) for 100,000 dollars on 3 March 2024. It is the only asset bought that year, so the mid-quarter convention does not apply. The firm elects out of both Section 179 and bonus depreciation and uses the standard 200 percent declining balance method with the half-year convention. What is its first-year MACRS depreciation deduction on the lathe?
A14,290 dollars, using the 14.29 percent first-year rate that the MACRS table sets for 7-year recovery property under the half-year convention.check_circle Correct
B20,000 dollars, using the 20.00 percent first-year rate that applies to 5-year recovery property under the half-year convention.
C7,145 dollars, by taking the 14.29 percent 7-year rate and then halving it again because the asset was held for only part of the year.
D28,580 dollars, by applying the 200 percent declining balance rate of two divided by seven to the full 100,000 dollar basis with no convention adjustment.
First-year MACRS on 7-year property under the half-year convention uses the 14.29 percent table rate, which already incorporates the half year. MACRS percentage tables combine the 200 percent declining balance method, the recovery period and the applicable convention into a single rate. For 7-year property under the half-year convention the first-year rate is 14.29 percent, so the deduction is 100,000 multiplied by 0.1429, or 14,290 dollars. The half year is already baked into the table rate, so no further halving is correct.
Why A is correct: A metal lathe is 7-year MACRS property, and the half-year-convention table gives a 14.29 percent first-year rate, so 100,000 multiplied by 14.29 percent equals 14,290 dollars.
Why B is wrong: Applying the 5-year first-year rate of 20 percent is a common slip when the recovery period is misread, but a metal lathe is 7-year property, so the correct first-year rate is 14.29 percent, not 20 percent.
Why C is wrong: Halving the table percentage is tempting if the candidate thinks the half-year convention must be applied on top of the rate, but the published 14.29 percent rate already builds in the half-year convention, so applying a second half is double-counting.
Why D is wrong: Computing two divided by seven of basis (28.58 percent) looks like the declining balance method, but it ignores the half-year convention that halves the first-year deduction, which the 14.29 percent table rate already reflects.
What you must be able to do. Handle the returns outside the mainstream entity types: fiduciary income tax for estates and trusts, tax-exempt organisation filing and unrelated business income, employer retirement plans, and the farm and rental-real-estate rules with the passive activity loss limitation.
In one sentenceThe specialised one-fifth of the exam: Form 1041 fiduciary tax with distributable net income, exempt organisations and unrelated business income tax, employer retirement plans, and farm and rental rules with passive loss limits.
Recall check: answer these from memory first
State the three conditions that make a trust a simple trust, and what changes when any one fails.
Name the form that reports unrelated business income and explain the silo rule for an organisation with two unrelated activities.
Give the two employer contribution options for a SIMPLE IRA and the penalty for an early distribution within the first two years.
Explain the 25,000-dollar active-participation rental allowance, who can use it, and how it phases out.
What it tests. Fiduciary income tax on Form 1041, including distributable net income, the income distribution deduction, simple versus complex trusts, and the compressed trust brackets. It tests Section 501(c)(3) qualification, the Form 990 series filing thresholds, and unrelated business income tax on Form 990-T with its activity-by-activity (silo) computation. It tests employer retirement plans - SEP-IRA, SIMPLE IRA, solo 401(k), and qualified defined-contribution and defined-benefit plans - with their contribution and deduction limits and prohibited transactions. It tests farm income and expenses on Schedule F, farm income averaging on Schedule J, and the passive activity loss limitation with the up-to-25,000-dollar active-participation exception and the real-estate-professional rules.
How to study it. This domain is broad but shallow, so secure it with targeted practice rather than long reading. Learn the simple-versus-complex trust test cold: a simple trust must distribute all income currently, make no charitable gifts, and distribute no corpus; anything else is complex. Tie distributable net income to the distribution deduction and the beneficiary's Schedule K-1. For exempt organisations, fix the split between the annual Form 990 information return and the Form 990-T that reports unrelated business income, and remember the silo rule keeps a loss from one unrelated activity from offsetting income of another. Memorise the SIMPLE IRA employer choice (3 per cent dollar-for-dollar match or 2 per cent nonelective) and the 25 per cent early-distribution penalty inside the first two years. For rentals, drill the 25,000-dollar active-participation allowance and its phase-out, and that suspended passive losses release on a fully taxable disposition.
Easy to confuse
Simple trust versus complex trust. A simple trust is required to distribute all income currently, makes no charitable contributions, and distributes no corpus; a complex trust may accumulate income, give to charity, or distribute principal. The exam claims that any distribution makes a trust complex, when it is the instrument's requirements and the year's actions together that decide.
Form 990 versus Form 990-T. Form 990 (or 990-EZ or 990-N by gross-receipts threshold) is the annual information return every exempt organisation files; Form 990-T reports and pays the unrelated business income tax when gross unrelated income reaches 1,000 dollars. The exam reports unrelated income on the 990 or treats it like a 1120, when 990-T is the correct return.
SIMPLE IRA matching versus nonelective contribution. An employer either matches deferrals dollar for dollar up to 3 per cent of a deferring employee's compensation, or makes a 2 per cent nonelective contribution for every eligible employee whether or not they defer. The exam swaps the percentages or borrows the SEP-IRA ceiling to misstate the obligation.
The 25 per cent SIMPLE early-distribution penalty versus the ordinary 10 per cent. Early distributions from a SIMPLE IRA before age 59 and a half normally carry the 10 per cent additional tax, but the rate is 25 per cent if the distribution occurs within the two-year period that begins when the employee first participates. The exam offers the 10 per cent rate on a distribution that is still inside the two-year window.
Active participation versus material participation versus real-estate professional. Active participation is a low bar that unlocks the up-to-25,000-dollar rental loss allowance, phasing out as modified AGI rises; material participation and real-estate-professional status are higher standards that can take rental losses out of the passive category entirely. The exam blurs the three to grant or deny a loss under the wrong test.
Worked example from the SEE-2 bank
lock_openFree sampleSpecialized Returns and Taxpayersmedium
Brightwater Community Arts, a newly formed nonstock nonprofit corporation, plans to operate solely to teach free painting and music classes to disadvantaged children. Its founders want federal recognition of exemption under Section 501(c)(3) so that donors can deduct contributions. The organisation is not a church, not a school, and expects annual gross receipts well above 50,000 dollars. Its lawyer asks which application the organisation must file with the IRS to obtain a determination letter recognising its exempt status. Which form should Brightwater file?
AForm 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, the full application used by organisations that are not eligible for the streamlined version.check_circle Correct
BForm 1024, Application for Recognition of Exemption Under Section 501(a) or Section 521, the application used by charitable organisations seeking 501(c)(3) status.
CForm 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3), which any organisation may use regardless of its expected gross receipts.
DForm 8976, Notice of Intent to Operate Under Section 501(c)(4), filed electronically to notify the IRS that the organisation is operating as a charity.
A charity seeking recognition under Section 501(c)(3) applies on Form 1023, using Form 1023-EZ only when it meets the small-organisation eligibility limits. An organisation that wants the IRS to recognise it as tax-exempt under Section 501(c)(3) applies for a determination letter on Form 1023. A streamlined Form 1023-EZ exists, but only organisations that pass an eligibility worksheet may use it, and one condition is that projected annual gross receipts do not exceed 50,000 dollars. Brightwater expects receipts well above that ceiling, so it is ineligible for the short form and must file the full Form 1023. Form 1024 covers exemption under other paragraphs of Section 501(c), and Form 8976 is the operating notice for 501(c)(4) social welfare organisations, so neither fits a charity seeking 501(c)(3) recognition.
Why A is correct: A 501(c)(3) organisation generally seeks recognition by filing Form 1023, and because Brightwater expects gross receipts above the streamlined eligibility ceiling it must use the full Form 1023 rather than the short-form alternative, making this the correct application.
Why B is wrong: Form 1024 is used by organisations seeking exemption under most other paragraphs of Section 501(c), such as 501(c)(4) or 501(c)(6), not by 501(c)(3) charities, so naming it here applies the wrong application form.
Why C is wrong: Form 1023-EZ is restricted to small organisations that meet the eligibility limits, including projected annual gross receipts of 50,000 dollars or less; Brightwater expects more, so it is not eligible for the streamlined form.
Why D is wrong: Form 8976 is the notice a 501(c)(4) social welfare organisation files, not a recognition application for a 501(c)(3) charity, so it neither recognises exemption nor applies to Brightwater's charitable purpose.
A study plan that works
Map the blueprint and book a date
Day 1
Read the official content outline and the three sections with their weights. Book a provisional test date now: a fixed date converts open-ended study into a plan and is the single biggest predictor of actually sitting Part 2, the part candidates most often defer.
Lock entity taxation and basis (Section 1)
Weeks 1-2
Build the entity comparison table and the two nonrecognition rules (Section 721 with no control test, Section 351 with 80 per cent control). Drill partner outside basis and S corporation stock-and-debt basis until tracking them is mechanical, because every later loss-limitation question depends on getting basis right first.
Go deep on business tax preparation (Section 2)
Weeks 2-4
This is the heaviest section, so spend the most time here. Make cost recovery a fixed routine (179 first, then 60 per cent bonus for 2024, then MACRS) and drill Section 1245 and 1250 recapture, the accrual-versus-cash trigger, the deduction limits, and the Schedule M-1 reconciliation on worked numerical problems, not flashcards.
Cover the specialised returns (Section 3)
Week 4
Work through Form 1041 and distributable net income, the exempt-organisation Form 990 and 990-T split, employer retirement plans, and the farm and passive-loss rules. This section is broad but shallow, so a focused pass plus targeted practice secures the marks.
Practise on worked problems with explanations
Week 5
Move to full practice sets and read the explanation for every question, including the ones you got right. Part 2 tests exact computation on the exact basis, so understanding why a distractor uses the wrong number or the wrong entity rule is where the marks are.
Find and close your weak areas
Week 5
Use your per-section accuracy to drill the areas dragging you down rather than re-reading what you already know. Depreciation, recapture, and basis are the usual weak spots; repeat until every section clears the pass line with margin.
Sit a timed mock and review it
Week 6
Take at least one full timed mock to rehearse pacing and the mark-and-return habit across a long sitting. Treat the score as a per-section readiness signal, then review every missed question before booking or sitting the real exam.
Know when you're ready
Readiness for Part 2 is a measured score on business problems you have not seen before, not a feeling that the material is familiar. Those are different things, and the gap between them is where candidates fail. Re-reading notes and nodding along to a worked explanation builds fluency, and fluency feels like knowledge, so confidence rises while real recall does not. The fix is to test yourself on fresh questions: if you can compute the right figure on the right basis and say why each distractor is wrong, you know it; if you can only follow the explanation once it is shown, you do not yet.
Be especially careful with the computational sections. Depreciation, recapture, and basis questions feel easy when you watch someone solve them and hard when the timer is running and you must pick the exact number. Trust your measured per-section accuracy over your gut, and set the bar at clearing each of the three sections comfortably on unseen questions across more than one session, not scraping a target once.
This guide gives you the map. The practice bank is where you find out whether you can navigate it, with a worked explanation and a reason every distractor is wrong on every question. Readiness scoring tells you when you are there. Not before.
Ready to put this into practice?
Free SEE-2 questions with worked explanations. No sign-up.
Identify the entity before you compute anything. The same fact pattern gives different answers for a partnership, an S corporation, and a C corporation, and the most common trap is the correct rule applied to the wrong entity.
Check which year property was placed in service. Bonus depreciation phases down, and for 2024 it is 60 per cent, not 100 per cent, so a stem dated 2024 rules out the full-expensing distractor.
Apply cost recovery in order: Section 179 first, then bonus on the reduced basis, then MACRS, and test the Section 179 business-income cap before the dollar limit.
For recapture, ask the lesser of two numbers. Section 1245 recaptures the lesser of depreciation taken or gain realised as ordinary income, so a full-gain answer is usually wrong.
Watch for limitation distractors. Many questions give the tentative figure and the limited figure as separate options; read whether the question wants the amount before or after the cap.
Mark and return on long computations. Do not lose time on one multi-step basis problem when easier marks are waiting; the sitting is long and pacing decides borderline passes.
Eliminate the wrong-entity and wrong-basis options first. Most questions have two distractors built from a plausible wrong number or the wrong entity's rule; removing them turns a guess into a coin flip at worst.
Frequently asked questions
Is SEE Part 2 the hardest of the three parts?
Most candidates find it so. It carries the broadest computational content - entity taxation, depreciation, recapture, basis, and the specialised returns - and rewards exact calculation rather than recognition. Plan more study time for Part 2 than for Parts 1 or 3.
How long should I study for SEE Part 2?
Candidates who already prepare individual returns are typically ready in five to seven weeks of focused study. Less business-tax background means more time on entity basis and the depreciation and recapture rules, which is where the weight and the difficulty sit.
Do I need an accounting degree to pass?
No. There is no education requirement to sit the SEE. You need a solid grasp of federal business tax rules and comfort with the arithmetic; many successful Enrolled Agents come from preparer and bookkeeping backgrounds rather than formal accounting study.
What tax year does the exam test?
The SEE testing window tests the prior tax year's law. This guide and the practice bank are authored to tax year 2024 rules, including the 60 per cent bonus depreciation rate and the indexed Section 179 limits. Confirm the year covered by your testing window before you sit.
Which section should I focus on?
Business Tax Preparation is the largest section and deserves the most time, with entity taxation and basis close behind because the loss-limitation questions depend on it. The specialised returns section is the smallest, broad but shallow, and best secured with targeted practice.
What is the difference between partnership and S corporation loss limits?
Both limit deductible losses to a shareholder's or partner's basis, but a partner's outside basis includes a share of partnership liabilities while an S corporation shareholder's stock basis does not. Only debt a shareholder personally lends to the S corporation creates separate debt basis, so the same loss can be deductible for a partner yet suspended for an S shareholder.
Can I take the three SEE parts in any order?
Yes. The parts can be taken in any order and are scored independently, and you have a multi-year window to pass all three. Many candidates sit Part 1 (Individuals) or Part 3 (Representation) before Part 2 to build momentum, but there is no required sequence.
How many practice questions should I do before booking?
Enough that every section clears the pass line with margin on questions you have not seen before, and that a full timed mock feels comfortable on pacing across the long sitting. Quality of review matters more than raw volume: read the explanation and the wrong-answer reasoning on every question.
Is the Enrolled Agent SEE Part 2 worth it?
SEE Part 2 is worth it for tax professionals who prepare business returns or advise business owners, and who are working toward the Enrolled Agent credential. The business taxation depth tested here - entity selection, partnership and corporate taxation, depreciation, and specialised returns - applies directly to practice and is not covered by any other IRS-recognised credential. Together with Parts 1 and 3, passing Part 2 earns EA status, which is the only IRS-issued licence for unlimited representation rights before the IRS.
Examworthy is not affiliated with or endorsed by IRS / Prometric. This guide is original study material based on the public exam blueprint. We never reproduce live exam items. SEE-2 and related marks belong to their respective owners.
