WGU C237 TAXATION 1 EXAM 2026/2027 ACCURATE EXAM
COMPLETE APPROVED QUESTIONS WITH WELL
ELABORATED SOLUTIONS AND DETAILED RATIONALES
(100% CORRECT VERIFIED ANSWERS) CURRENTLY
UPDATED VERSION 2026 EDITION |GUARANTEED SUCCESS
A+ |BRAND NEW! |FULL REVISED WGU C237 TAXATION 1
ACTUAL EXAM
Question 1
Which of the following is a hallmark of a progressive tax system?
A) All taxpayers pay the same percentage of income.
B) Higher income earners pay a larger percentage of their income in
taxes.
C) The tax rate decreases as income increases.
D) The tax is applied at a flat rate per unit consumed.
Correct Answer: B – Higher income earners pay a larger percentage of
their income in taxes.
Rationale: A progressive tax imposes higher effective tax rates on
higher incomes, which is the opposite of regressive or flat taxes.
Question 2
Under the Internal Revenue Code, gross income includes:
A) Gifts received from a friend.
B) Inheritances received from a decedent.
C) Life insurance proceeds paid upon death.
D) Wages, salaries, and tips.
Correct Answer: D – Wages, salaries, and tips.
Rationale: Gross income is defined as all income from whatever
source derived, but specific exclusions exist for gifts, inheritances, and
life insurance proceeds.
,Question 3
Which of the following deductions is considered "for AGI" (above-the-
line)?
A) Medical expenses.
B) Charitable contributions.
C) Alimony payments under pre-2019 divorce agreements.
D) State income taxes paid.
Correct Answer: C – Alimony payments under pre-2019 divorce
agreements.
Rationale: Alimony payments that meet pre-TCJA rules are deductible
for AGI; medical, charitable, and state taxes are itemized deductions
(from AGI).
Question 4
A taxpayer has a short-term capital loss
of 5,000andalong−termcapitalgainof5,000andalong−termcapitalgainof2,
000. The taxpayer also
has 3,000ofordinaryincome.Whatisthenetcapitallossdeductibleagainstord
inaryincomefortheyear?A)3,000ofordinaryincome.Whatisthenetcapitallo
ssdeductibleagainstordinaryincomefortheyear?A)0
B) 2,000C)2,000C)3,000
D) $5,000
Correct Answer:
C – 3,000∗Rationale:Afternettingshort−termandlong−term,netcapitalloss
is3,000∗Rationale:Afternettingshort−termandlong−term,netcapitalloss
is3,000 (5,000loss−5,000loss−2,000 gain). Individuals can deduct up
to $3,000 of net capital loss against ordinary income annually.*
Question 5
Which tax authority has the highest legal weight in a U.S. federal tax
dispute?
A) IRS Revenue Ruling.
B) Internal Revenue Code.
, C) Treasury Regulation.
D) Tax Court Regular Decision.
Correct Answer: B – Internal Revenue Code.
Rationale: The IRC is the statute enacted by Congress; regulations
and rulings must be consistent with the Code, and court decisions
interpret it.
Question 6
A cash-basis taxpayer received a $5,000 check on December 30, Year 1,
but did not deposit it until January 2, Year 2. In which year is the income
recognized?
A) Year 1 only if the check was cashed.
B) Year 1 because the taxpayer had constructive receipt.
C) Year 2 because deposit is required for actual receipt.
D) Split equally between Year 1 and Year 2.
Correct Answer: B – Year 1 because the taxpayer had constructive
receipt.
Rationale: Constructive receipt occurs when income is made available
without restriction, even if not physically possessed.
Question 7
Which of the following is not a valid filing status for a single individual
with no dependents?
A) Single.
B) Head of household.
C) Qualifying widow(er).
D) Married filing separately.
Correct Answer: C – Qualifying widow(er).
Rationale: Qualifying widow(er) requires spouse’s death within the
prior two years and a dependent child; a single person with no
dependents cannot qualify.
Question 8
For tax year 2026, the standard deduction for a married couple filing
COMPLETE APPROVED QUESTIONS WITH WELL
ELABORATED SOLUTIONS AND DETAILED RATIONALES
(100% CORRECT VERIFIED ANSWERS) CURRENTLY
UPDATED VERSION 2026 EDITION |GUARANTEED SUCCESS
A+ |BRAND NEW! |FULL REVISED WGU C237 TAXATION 1
ACTUAL EXAM
Question 1
Which of the following is a hallmark of a progressive tax system?
A) All taxpayers pay the same percentage of income.
B) Higher income earners pay a larger percentage of their income in
taxes.
C) The tax rate decreases as income increases.
D) The tax is applied at a flat rate per unit consumed.
Correct Answer: B – Higher income earners pay a larger percentage of
their income in taxes.
Rationale: A progressive tax imposes higher effective tax rates on
higher incomes, which is the opposite of regressive or flat taxes.
Question 2
Under the Internal Revenue Code, gross income includes:
A) Gifts received from a friend.
B) Inheritances received from a decedent.
C) Life insurance proceeds paid upon death.
D) Wages, salaries, and tips.
Correct Answer: D – Wages, salaries, and tips.
Rationale: Gross income is defined as all income from whatever
source derived, but specific exclusions exist for gifts, inheritances, and
life insurance proceeds.
,Question 3
Which of the following deductions is considered "for AGI" (above-the-
line)?
A) Medical expenses.
B) Charitable contributions.
C) Alimony payments under pre-2019 divorce agreements.
D) State income taxes paid.
Correct Answer: C – Alimony payments under pre-2019 divorce
agreements.
Rationale: Alimony payments that meet pre-TCJA rules are deductible
for AGI; medical, charitable, and state taxes are itemized deductions
(from AGI).
Question 4
A taxpayer has a short-term capital loss
of 5,000andalong−termcapitalgainof5,000andalong−termcapitalgainof2,
000. The taxpayer also
has 3,000ofordinaryincome.Whatisthenetcapitallossdeductibleagainstord
inaryincomefortheyear?A)3,000ofordinaryincome.Whatisthenetcapitallo
ssdeductibleagainstordinaryincomefortheyear?A)0
B) 2,000C)2,000C)3,000
D) $5,000
Correct Answer:
C – 3,000∗Rationale:Afternettingshort−termandlong−term,netcapitalloss
is3,000∗Rationale:Afternettingshort−termandlong−term,netcapitalloss
is3,000 (5,000loss−5,000loss−2,000 gain). Individuals can deduct up
to $3,000 of net capital loss against ordinary income annually.*
Question 5
Which tax authority has the highest legal weight in a U.S. federal tax
dispute?
A) IRS Revenue Ruling.
B) Internal Revenue Code.
, C) Treasury Regulation.
D) Tax Court Regular Decision.
Correct Answer: B – Internal Revenue Code.
Rationale: The IRC is the statute enacted by Congress; regulations
and rulings must be consistent with the Code, and court decisions
interpret it.
Question 6
A cash-basis taxpayer received a $5,000 check on December 30, Year 1,
but did not deposit it until January 2, Year 2. In which year is the income
recognized?
A) Year 1 only if the check was cashed.
B) Year 1 because the taxpayer had constructive receipt.
C) Year 2 because deposit is required for actual receipt.
D) Split equally between Year 1 and Year 2.
Correct Answer: B – Year 1 because the taxpayer had constructive
receipt.
Rationale: Constructive receipt occurs when income is made available
without restriction, even if not physically possessed.
Question 7
Which of the following is not a valid filing status for a single individual
with no dependents?
A) Single.
B) Head of household.
C) Qualifying widow(er).
D) Married filing separately.
Correct Answer: C – Qualifying widow(er).
Rationale: Qualifying widow(er) requires spouse’s death within the
prior two years and a dependent child; a single person with no
dependents cannot qualify.
Question 8
For tax year 2026, the standard deduction for a married couple filing
