WGU - C237 - TAXATION 1 2026 Exam Latest!!
LATEST VERSIONS 370 QUESTIONS AND
CORRECT VERIFIED ANSWERS WITH
RATIONALES (100% CORRECT) A+ GRADED
ASSURED
12 Month Rule - CORRECT ANSWER: A regulation that allows prepaid business expenses to be
currently deducted when the contract does not extend beyond a specific numbers of months and
the contract period does not extend beyond the end of the tax year following the year of the
payment. (Ch 6-15)
1231 Assets - CORRECT ANSWER: Depreciable or real property used in a taxpayers trade or
business owned for more than one year. (Ch 11-8)
1231 Look Back Rule - CORRECT ANSWER: A tax rule requiring taxpayers to treat current
year net (Ch 11-18)
1245 Property - CORRECT ANSWER: Tangible personal property and intangible property
subject to cost recovery deductions. (Ch 11-10)
1250 Property - CORRECT ANSWER: Real property subject to cost recovery deductions. (Ch
11-14)
291 Depreciation Recapture - CORRECT ANSWER: The portion of a corporate taxpayer's gain
on real property that is converted from 1231 gain to ordinary income. (Ch 11-14)
30 - CORRECT ANSWER: Number of days that are initially given to an audited individual or
business to either request a conference with an appeals officer or agree to the proposed
adjustment. (Ch 2-6)
,481 Adjustment - CORRECT ANSWER: A change to taxable income associated with a change in
accounting methods. (Ch 9-30)
90 - CORRECT ANSWER: Number of days that are given to an audited individual or business
after the appeals conference to either pay the proposed deficiency or file a petition in the US Tax
Court to hear the case. (Ch 2-6)
Abandoned Spouse - CORRECT ANSWER: A married taxpayer who lives apart from the spouse
for the last 6 months of the year, who files a tax return separate from the spouse, and who
maintains a household for a qualifying child. (Ch 4-24)
Accelerated Death Benefits - CORRECT ANSWER: Early receipt of life insurance proceeds that
are not taxable un certain circumstances, such as the taxpayer is medically certified with an
illness that is expected to cause death within 24 months. (Ch 5-28)
Accountable Plan - CORRECT ANSWER: An Employer's reimbursement plan under which
employees must submit documentation supporting expenses to receive reimbursement and
reimbursements are limited to legitimate business expenses. (Ch 5-23)
Accounting Methods - CORRECT ANSWER: The procedure for determining the taxable year in
which a business recognizes a particular item of income or deduction, thereby dictating the
timing of when a taxpayer reports income and deductions. (Ch 9-14)
Accounting Period - CORRECT ANSWER: A fixed period of time win which a business reports
income and deductions. (Ch 9-13)
Accrual Method - CORRECT ANSWER: A method of accounting that generally recognizes
income in the period earned and recognizes deductions in the period that liabilities are incurred.
(Ch 5-6)
,Accumulated Earnings Tax - CORRECT ANSWER: A tax assessed on corporations that retain
earning without a business reason to do so. (Ch 15-3)
Acquiescence - CORRECT ANSWER: Issued after the IRS loses a trial-level or circuit court
case where the IRS doesn't necessarily agree with the court's ruling, but chooses to no longer
litigate the issue. (Ch 2-17)
Action on Decision - CORRECT ANSWER: An IRS pronouncement that explains the
background reasoning behind an IRS acquiescence or nonacquiescence . (Ch 2-17)
Ad Valorem - CORRECT ANSWER: A type of tax based on the value of property. (Ch 1-15)
Additional Medicare Tax - CORRECT ANSWER: A tax imposed at a rate of .9% for salary or
wages or net self-employment earning in excess of $200,000. (Ch 8-14)
Adjusted Basis - CORRECT ANSWER: An asset's carrying value for tax purposes at a given
point in time, measured as the initial basis plus capital improvements less depreciation or
amortization. (Ch 10-1,11-5)
Adjusted Gross Income - CORRECT ANSWER: Gross income less specific "above the line"
deductions. It is an important reference point in the income tax formula. (Ch 4-2)
After Tax Rate of Return - CORRECT ANSWER: A taxpayer's before-tax rate of return on an
investment minus the taxes paid on the income from the investment. (Ch 3-3)
Alimony - CORRECT ANSWER: A support payment of cash made to a former spouse. (Ch 5-
14)
All Events Test - CORRECT ANSWER: Requires that income or expenses are recognized when
all events have occurred that determine or fix the right to receive the income or liability to make
, the payments and the amount of the income or expense can be determined with reasonable
accuracy. (Ch 9-21)
All Inclusive Income - CORRECT ANSWER: A concept that says: Gross income means all
income from whatever source derived. (Ch 4-2)
Allowance Method - CORRECT ANSWER: Method used for financial reporting purposes; under
this method, bad debt expense is based on an estimate of the amount of the bad debts in AR at
YE. (Ch 9-25)
Alternative Minimum Tax - CORRECT ANSWER: A tax that is designed to require taxpayers to
pay some specific level of tax even when they have low or no regular taxable income as a result
of certain tax breaks in the tax code. (Ch 4-11)
Alternative Minimum Tax Adjustments - CORRECT ANSWER: Adjustments, either positive or
negative, to regular taxable income to arrive at the alternative minimum tax base. (Ch 8-9)
Alternative Minimum Tax Base - CORRECT ANSWER: Alternative minimum taxable income
minus the alternative minimum tax exemption. (Ch 8-8)
Alternative Minimum Tax System - CORRECT ANSWER: A system that was designed to ensure
that taxpayers generating economic income pay some minimum amount of income tax each year.
(Ch 8-8)
Amortization - CORRECT ANSWER: The method of recovering the cost of intangible assets
over a specific time period. (Ch 10-1)
Amount Realized - CORRECT ANSWER: The value of everything received by the seller in a
transaction less selling costs. (Ch 11-2)
Analyze Tax Authorities - CORRECT ANSWER: Step 4 of tax research. (Ch 2-18)
LATEST VERSIONS 370 QUESTIONS AND
CORRECT VERIFIED ANSWERS WITH
RATIONALES (100% CORRECT) A+ GRADED
ASSURED
12 Month Rule - CORRECT ANSWER: A regulation that allows prepaid business expenses to be
currently deducted when the contract does not extend beyond a specific numbers of months and
the contract period does not extend beyond the end of the tax year following the year of the
payment. (Ch 6-15)
1231 Assets - CORRECT ANSWER: Depreciable or real property used in a taxpayers trade or
business owned for more than one year. (Ch 11-8)
1231 Look Back Rule - CORRECT ANSWER: A tax rule requiring taxpayers to treat current
year net (Ch 11-18)
1245 Property - CORRECT ANSWER: Tangible personal property and intangible property
subject to cost recovery deductions. (Ch 11-10)
1250 Property - CORRECT ANSWER: Real property subject to cost recovery deductions. (Ch
11-14)
291 Depreciation Recapture - CORRECT ANSWER: The portion of a corporate taxpayer's gain
on real property that is converted from 1231 gain to ordinary income. (Ch 11-14)
30 - CORRECT ANSWER: Number of days that are initially given to an audited individual or
business to either request a conference with an appeals officer or agree to the proposed
adjustment. (Ch 2-6)
,481 Adjustment - CORRECT ANSWER: A change to taxable income associated with a change in
accounting methods. (Ch 9-30)
90 - CORRECT ANSWER: Number of days that are given to an audited individual or business
after the appeals conference to either pay the proposed deficiency or file a petition in the US Tax
Court to hear the case. (Ch 2-6)
Abandoned Spouse - CORRECT ANSWER: A married taxpayer who lives apart from the spouse
for the last 6 months of the year, who files a tax return separate from the spouse, and who
maintains a household for a qualifying child. (Ch 4-24)
Accelerated Death Benefits - CORRECT ANSWER: Early receipt of life insurance proceeds that
are not taxable un certain circumstances, such as the taxpayer is medically certified with an
illness that is expected to cause death within 24 months. (Ch 5-28)
Accountable Plan - CORRECT ANSWER: An Employer's reimbursement plan under which
employees must submit documentation supporting expenses to receive reimbursement and
reimbursements are limited to legitimate business expenses. (Ch 5-23)
Accounting Methods - CORRECT ANSWER: The procedure for determining the taxable year in
which a business recognizes a particular item of income or deduction, thereby dictating the
timing of when a taxpayer reports income and deductions. (Ch 9-14)
Accounting Period - CORRECT ANSWER: A fixed period of time win which a business reports
income and deductions. (Ch 9-13)
Accrual Method - CORRECT ANSWER: A method of accounting that generally recognizes
income in the period earned and recognizes deductions in the period that liabilities are incurred.
(Ch 5-6)
,Accumulated Earnings Tax - CORRECT ANSWER: A tax assessed on corporations that retain
earning without a business reason to do so. (Ch 15-3)
Acquiescence - CORRECT ANSWER: Issued after the IRS loses a trial-level or circuit court
case where the IRS doesn't necessarily agree with the court's ruling, but chooses to no longer
litigate the issue. (Ch 2-17)
Action on Decision - CORRECT ANSWER: An IRS pronouncement that explains the
background reasoning behind an IRS acquiescence or nonacquiescence . (Ch 2-17)
Ad Valorem - CORRECT ANSWER: A type of tax based on the value of property. (Ch 1-15)
Additional Medicare Tax - CORRECT ANSWER: A tax imposed at a rate of .9% for salary or
wages or net self-employment earning in excess of $200,000. (Ch 8-14)
Adjusted Basis - CORRECT ANSWER: An asset's carrying value for tax purposes at a given
point in time, measured as the initial basis plus capital improvements less depreciation or
amortization. (Ch 10-1,11-5)
Adjusted Gross Income - CORRECT ANSWER: Gross income less specific "above the line"
deductions. It is an important reference point in the income tax formula. (Ch 4-2)
After Tax Rate of Return - CORRECT ANSWER: A taxpayer's before-tax rate of return on an
investment minus the taxes paid on the income from the investment. (Ch 3-3)
Alimony - CORRECT ANSWER: A support payment of cash made to a former spouse. (Ch 5-
14)
All Events Test - CORRECT ANSWER: Requires that income or expenses are recognized when
all events have occurred that determine or fix the right to receive the income or liability to make
, the payments and the amount of the income or expense can be determined with reasonable
accuracy. (Ch 9-21)
All Inclusive Income - CORRECT ANSWER: A concept that says: Gross income means all
income from whatever source derived. (Ch 4-2)
Allowance Method - CORRECT ANSWER: Method used for financial reporting purposes; under
this method, bad debt expense is based on an estimate of the amount of the bad debts in AR at
YE. (Ch 9-25)
Alternative Minimum Tax - CORRECT ANSWER: A tax that is designed to require taxpayers to
pay some specific level of tax even when they have low or no regular taxable income as a result
of certain tax breaks in the tax code. (Ch 4-11)
Alternative Minimum Tax Adjustments - CORRECT ANSWER: Adjustments, either positive or
negative, to regular taxable income to arrive at the alternative minimum tax base. (Ch 8-9)
Alternative Minimum Tax Base - CORRECT ANSWER: Alternative minimum taxable income
minus the alternative minimum tax exemption. (Ch 8-8)
Alternative Minimum Tax System - CORRECT ANSWER: A system that was designed to ensure
that taxpayers generating economic income pay some minimum amount of income tax each year.
(Ch 8-8)
Amortization - CORRECT ANSWER: The method of recovering the cost of intangible assets
over a specific time period. (Ch 10-1)
Amount Realized - CORRECT ANSWER: The value of everything received by the seller in a
transaction less selling costs. (Ch 11-2)
Analyze Tax Authorities - CORRECT ANSWER: Step 4 of tax research. (Ch 2-18)
