EA Exam Part 2: Businesses

Part 2 at a glance

Part 2, Businesses, is one of three independently scheduled parts of the SEE. Each form has 100 multiple-choice questions: 85 scored and 15 unidentified experimental items that do not count. Testing time is 3.5 hours, and the IRS does not require an order of parts. PSI administers the exam. For U.S. domestic candidates the current window runs July 1, 2026 through February 28, 2027, and the fee is $317 per part, paid to PSI at scheduling. Retake limits and the March and April blackout are on the dates-and-fees page. Passing is a scaled score of 500, explained on the scoring page.

Part 2 domain map

The current PSI Candidate Information Bulletin controls the scope of Part 2. It sets three domains with fixed scored-question counts that total 85. If the bulletin changes, the bulletin wins. The linked topic lessons are PassFast study aids, not official SEE content.

• Business Entities and Considerations, 30 scored questions: entity types, classification and elections, partnership contributions, basis, and distributions, section 351 formation, earnings and profits, redemptions and liquidations, and S corporation eligibility and shareholder basis.
• Business Tax Preparation, 37 scored questions: gross receipts and cost of goods sold, compensation, depreciation and section 179, travel and vehicles, the qualified business income deduction, credits, net operating losses, accounting methods, book-tax reconciliation, and worker classification.
• Specialized Returns and Taxpayers, 18 scored questions: trusts, distributable net income and accounting income, exempt organizations and unrelated business income, retirement plans, farm income and farm tax computation, and rental property and passive loss limits.

How to pass SEE Part 2: timing and weights

To pass Part 2 you need a scaled 500, and the IRS publishes no raw-percent cutoff, so plan for full coverage and steady pacing rather than a target percentage. Spend study time in proportion to the scored weights below, then rehearse the clock until it feels routine. The pace targets are PassFast suggestions, not PSI rules.

• Clock: 3.5 hours of testing time for 100 questions, about 2 minutes per question. The appointment runs 4 hours to allow for a tutorial, a survey, and two scheduled 10-minute breaks.
• Sections: questions 1 to 34, 35 to 67, and 68 to 100. A scheduled break is offered after each of the first two sections. Once you finish a section you cannot return to it, so review flagged items before you move on.
• Pace targets: finish question 34 at about 71 minutes and question 67 at about 141 minutes of exam time, which leaves about 69 minutes for the last section.
• Weights: Business Entities and Considerations 30 (about 35%), Business Tax Preparation 37 (about 44%), Specialized Returns and Taxpayers 18 (about 21%), out of 85 scored questions.

A 10-week Part 2 plan weighted by domain

This example gives each domain study weeks in rough proportion to its scored questions, then leaves two weeks for timed rehearsal and logistics. It is an example pace, not a promise of a result. Repeat a week when its checkpoint fails.

• Week 1: take the free diagnostic and the free Part 2 sample closed-book, book a PSI date about ten weeks out (no later than February 28, 2027), and skim the Part 2 outline.
• Weeks 2 to 4: Business Entities and Considerations (30 scored). Entity classification and elections, partnership contributions, partner basis and distributions, section 351, and S corporation shareholder basis.
• Weeks 5 to 7: Business Tax Preparation (37 scored). Gross receipts and cost of goods sold, compensation, depreciation and section 179, the qualified business income deduction, accounting methods, and worker classification.
• Week 8: Specialized Returns and Taxpayers (18 scored). Trusts and distributable net income, exempt organizations, retirement plans, and farmers. End the week with a first full timed rehearsal.
• Week 9: two more timed mixed rehearsals on unseen questions. Review by domain and repair the weakest one.
• Week 10: light targeted review, PSI logistics, and an ID name check. Sit when mixed timed results are stable in all three domains.

What to study

Build study around the entity lifecycle, not a list of forms. For this window, questions reference the Code, regulations, forms, and publications as amended through December 31, 2025, and "current tax year" means calendar year 2025. Start with entity choice and classification, because every later rule depends on which return the business files. Then work each entity through formation, operations, distributions, and termination, giving extra time to basis. Move next to business income and deductions, then to the specialized returns.

Common practice mistake

Learning each entity in isolation. Part 2 questions often turn on a contrast: whether an item is separately stated, whether a distribution reduces basis or creates gain, or whether a loss is limited by basis or at-risk rules. Build comparison tables for partnerships, C corporations, and S corporations. A second mistake is treating the 18-question specialized domain as optional, when topics such as distributable net income or a farmer's estimated tax can decide a close result.

Sample practice question 1: cash distribution over basis

Sample practice written by PassFast from IRS Publication 541, not an official SEE item. Lena's beginning basis in her partnership interest is $9,000, and the partnership has no liabilities. Her distributive share of ordinary income is $5,000. During the year she withdrew $16,000 cash in anticipation of the current year's earnings. What gain does she recognize, and what is her ending basis? (A) No gain; basis of $0. (B) $2,000 gain; basis of $0. (C) $7,000 gain; basis of $0. (D) No gain; basis of negative $2,000.

• Answer: B.
• Rule: Publication 541 treats a withdrawal in anticipation of current earnings as received on the last day of the partnership's tax year, so the year's income increases basis first. Gain is recognized only to the extent money distributed exceeds basis, and basis never goes below zero.
• Basis before the distribution: $9,000 plus $5,000 equals $14,000.
• Gain: $16,000 minus $14,000 equals $2,000, generally treated as capital gain from the sale of the partnership interest.
• Ending basis: $14,000 minus $14,000 equals $0. Option C ignores the income increase, and option D takes basis below zero.

Sample practice question 2: a farmer's estimated tax

Sample practice written by PassFast from IRS Publication 225 (2025 returns), not an official SEE item. For 2025, Marcus has gross income from all sources of $90,000, including $63,000 of gross income from farming. He expects to owe more than $1,000 of tax. Which choice is available to him? (A) He must pay estimated tax in four quarterly installments. (B) He owes no estimated tax for 2025 if he files his 2025 Form 1040 and pays all tax due by March 2, 2026. (C) He does not qualify for the farmer rules because farming is less than 75% of his gross income. (D) He may skip estimated tax only if he files by April 15, 2026.

• Answer: B.
• Rule: Publication 225 says that if at least two-thirds of gross income for the current or prior year is from farming, a taxpayer who files and pays all tax due by March 2, 2026 owes no 2025 estimated tax. Otherwise, a qualified farmer makes one required annual payment by January 15, 2026.
• Test: $63,000 divided by $90,000 equals 70%, which exceeds two-thirds (about 66.7%).
• Why not C: the threshold is two-thirds, not 75%. Why not D: the special date is March 2, not April 15.

Practice method for Part 2

Start with the free Part 2 sample, which uses IRS-published questions for the current law period with source references and explanations. Work each item closed-book, then read why every option is right or wrong. Write out basis and distribution arithmetic line by line rather than in your head. Then move from short domain sets to mixed timed sets across all three domains. A practice percentage is a training signal. It is not a scaled score, and no percentage converts to the official passing mark of 500. No practice set is an official SEE form, and none predicts or guarantees a result.

A Part 2 study path

First, take the free diagnostic to see whether Part 2 should come first. Email is required, and the result is a part-priority signal, not a pass prediction. Second, put Part 2 on a calendar with the 10-week study plan, an example pace rather than a promise. Third, work the domain map in order and check retrieval with the free sample. Fourth, when mixed timed sets are stable in every domain, schedule through PSI at least 24 hours ahead.

Choosing Part 2 materials

Part 2 materials should match the current PSI outline and the law period through December 31, 2025, and report results by domain. The study-materials guide is the checklist, and the courses guide compares formats. When Part 2 is stable, the Part 1 and Part 3 hubs cover the next appointment.