Is SEE Part 2 hard? Difficulty explained

Yes — for most candidates SEE Part 2 is hard, because it covers material many preparers rarely touch: partnership and S corporation basis, corporate distributions, depreciation elections, trusts, exempt organisations and farm returns. The format is identical to the other parts, and the pass mark is the same scaled 500, but the content is further from the day-to-day work of someone who mostly prepares individual returns. It is very passable with six to eight weeks of structured work; it is not passable by relying on experience alone.

We do not quote pass rates: we found none published on irs.gov, and figures elsewhere cannot be checked.

What makes it hard

Unfamiliar territory for many candidates. Plenty of people sitting the SEE prepare Forms 1040 all season and see a Form 1065 or 1120-S only as a K-1 arriving from someone else. Part 2 asks you to be the person who prepared that K-1. Business entities alone are 30 of the 85 scored questions.

Basis calculations, everywhere. Partner’s basis, S corporation stock and debt basis, section 351 boot, corporate distributions through E&P, asset basis and depreciation recapture. Each is a multi-step calculation where one missed adjustment gives you a wrong answer that is also one of the options.

Breadth in the smallest domain. Specialized Returns is only 18 questions but covers trusts and estates, exempt organisations, retirement plans, farmers and rental property. That is five separate bodies of rules for three or four questions each. Skipping one is tempting and costly.

The 2025 rule changes. The exam tests law as amended through December 31, 2025, and the 2025 legislation changed section 179 and bonus depreciation, while other changes — the higher Form 1099-NEC threshold, for example — apply only after 2025. Candidates who study from the wrong year’s material pick confidently wrong answers.

Locked sections. Once you finish questions 1–34 or 35–67 you cannot go back. A long calculation you parked for later has to be resolved before you leave its section.

Closed book, on-screen calculator only. No reference material, so the rules and 2025 figures have to be in your head.

What makes it easier

The syllabus is published and specific. The PSI Candidate Information Bulletin lists every topic and the exact number of scored questions per domain. There are no surprise domains.

Multiple choice with four options. You are recognising the right answer, not preparing a return. Eliminating two options is often enough.

The rules are stable at the core. Partnership basis, S corporation eligibility, section 351, E&P ordering, DNI and the passive loss allowance are long-standing. Learn them once and they stay learned.

Much of it is arithmetic you can drill. The same half-dozen calculations recur. Candidates who work a few dozen examples before exam day find large parts of the paper become mechanical.

Four attempts per window. A fail is not the end; you get diagnostic feedback by area and can resit.

Who finds it hardest

What catches people out

• Using fair market value for basis. Contributions to partnerships and corporations generally carry over the contributor’s adjusted basis.
• Forgetting liabilities in partner basis. An increase in your share of partnership liabilities increases basis; a decrease is treated as a cash distribution.
• Treating S corporation distributions like C corporation dividends. For an S corporation without accumulated E&P, distributions are tax-free up to stock basis.
• Applying the wrong limit. The 50% rule is for meals, the $25 limit for gifts. Distractors are built from the wrong rule.
• Studying from post-2025 material. The exam asks about 2025.
• Misreading EXCEPT questions. Three options are true; you want the one that is not.

A quick self-assessment

You are in good shape to start if you can already:

• Explain the default tax classification of a two-member LLC.
• Compute a partner’s basis after a contribution, a year’s income and a distribution.
• Say when an S corporation shareholder can deduct a loss.
• State how a corporate distribution is split between dividend, return of basis and gain.
• Name the form an exempt organisation uses to report unrelated business income.

Yes to three or more: six weeks is realistic. Fewer: plan eight.

The verdict

Hard, mainly because it is unfamiliar, not because the questions are tricky. It rewards structured practice on basis and entity rules more than any other part. Start with the free sample questions to see where you stand, then follow the study plan. The exam tips cover the timing side.