A shareholder contributes property with a basis of $40,000 and FMV of $60,000 to an existing S corporation in a nontaxable transfer. How does this affect stock basis?

Stock basis increases by $40,000

Stock basis increases by $60,000

Stock basis increases by $20,000

In a liquidating distribution, when can a partner recognize a loss?

Only when the partner receives nothing but money, unrealized receivables and inventory, and their basis is less than outside basis

Only if the partnership is terminated by sale

Whenever the total fair market value of the property received in the distribution, including any money, is less than the partner's outside basis

What is the federal income tax rate for C corporations for 2025?

Graduated rates from 15% to 35%

Which feature would violate the S corporation one-class-of-stock rule?

Shares with different rights to distributions or liquidation proceeds

Voting and nonvoting common shares with otherwise identical economic rights

Shareholders with different numbers of shares

A buy-sell agreement at fair market value

When must a C corporation make estimated tax payments?

When it expects to owe $500 or more, in installments due by the 15th day of the 4th, 6th, 9th and 12th months of the tax year

Only if it owes more than $1,000

Quarterly on the same dates as individuals

On the sale of a partnership interest, which portion of the gain is ordinary income?

The portion attributable to unrealized receivables and inventory items ("hot assets") under IRC 751

Only the portion attributable to goodwill and other section 197 intangibles owned by the partnership at the date of sale

A closely held C corporation is subject to the passive activity loss rules in a modified way. Which statement is correct?

It can use passive losses to offset its net active income but not its portfolio income

It can use passive losses against any income, including both active and portfolio income

Passive losses are fully disallowed

It is exempt from the passive loss rules

EA exam Part 2: Businesses

Part 2 covers business taxation: entity choice and classification, partnerships, C corporations, S corporations, business income and deductions, depreciation and dispositions, accounting methods and records, and specialized returns for trusts and estates, exempt organizations, retirement plans, farmers and rental property. It has 100 questions (85 scored), a 3.5-hour limit and costs $317; you need a scaled 500 to pass.

Updated 2026-09-23 · 5 sources · By the EnrolledAgentKit team

Part 2 at a glance

Scored questions

+15 unscored

Time

3.5 hours

Fee

$317

paid to PSI

Passing score

500

scaled 200-800

Domains

IRS content specs

Reported pass rate

71%

2024-25, third-party compiled

Official Part 2 domains (IRS content specifications)

Source: IRS - SEE Part 2 content specifications (Businesses). Each part also has 15 unscored pretest questions.
Domain	Scored questions	Share
Business Entities and Considerations	30	35%
Business Tax Preparation	37	44%
Specialized Returns and Taxpayers	18	21%
Total scored	85	100%

Study order that follows the weights

Business Tax Preparation alone is 37 of 85 questions: depreciation, recapture, QBI, expenses and accounting methods. Then Business Entities (30): partnership and S corporation basis, section 351 and corporate distributions. Finish with the 18-question specialized domain (trusts, exempt organizations, retirement plans, farmers, rentals).

Our editorial estimate for most candidates is 50-80 study hours for Part 2; build a week-by-week plan with the study plan generator.

Part 2 topic guides

Try 10 free Part 2 questions

EA Part 2 (Businesses) practice questions

Which items increase an S corporation shareholder's stock basis?

Common traps

S corporation basis ordering: income first, then distributions, then nondeductible expenses, then losses. Debt basis comes only from direct shareholder loans, not guarantees.
Partnership liabilities change outside basis; relief of liabilities is a deemed cash distribution that can trigger gain.
Section 179 is limited to business income; bonus depreciation is not.
Unrecaptured section 1250 gain (25% max) is not ordinary recapture for individuals.

All 3 parts, 900 questions, $149 once

Original questions weighted to the IRS content specifications, with explanations that cite the Code, Circular 230 and IRS publications. One payment, free access extension until you pass.

Get all 3 parts - $149

Frequently asked questions

How many questions are on Part 2?

100 multiple-choice questions: 85 scored and 15 unscored pretest items you cannot identify. You have 3.5 hours.

What tax year does Part 2 test?

The 2026-27 exam tests the Internal Revenue Code, forms and publications as amended through Dec. 31, 2025. Unless a question says otherwise, it is about calendar year 2025.

Which part should I take first?

Any order is allowed. Many candidates start with the part closest to their work: preparers often start with Part 1; Part 3 is the most rules-based and least numeric. See the study guide.

What is the Part 2 pass rate?

Review providers report about 71% for the 2024-25 testing year, compiled from IRS-released data. See EA exam pass rates.

Sources

IRS - SEE Part 2 content specifications (Businesses) (accessed 2026-09-23)
IRS - Enrolled agents: Frequently asked questions (accessed 2026-09-23)
Gleim - Enrolled agent exam pass rates (compiled from IRS-released data) (accessed 2026-09-23) - Third-party compilation; the IRS no longer hosts a current statistics page we could locate on 2026-09-23.
IRS Rev. Proc. 2024-40 - 2025 inflation adjustments (accessed 2026-09-23)
IRS - One, Big, Beautiful Bill provisions (P.L. 119-21) (accessed 2026-09-23)