Page 1 of 36
WGU - C237 - TAXATION 1 SUMMARIZED NOTES MOST
COMPREHENSIVE 2026 QUESTIONS EXAM LATEST
VERSION SOLVED QUESTIONS & ANSWERS VERIFIED
100 %
30
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)
90
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)
12 Month Rule
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
Depreciable or real property used in a taxpayers trade or business owned for more
than one year. (Ch 11-8)
1231 Look Back Rule
, Page 2 of 36
A tax rule requiring taxpayers to treat current year net (Ch 11-18)
1245 Property
Tangible personal property and intangible property subject to cost recovery
deductions. (Ch 11-10)
1250 Property
Real property subject to cost recovery deductions. (Ch 11-14)
291 Depreciation Recapture
The portion of a corporate taxpayer's gain on real property that is converted from
1231 gain to ordinary income. (Ch 11-14)
481 Adjustment
A change to taxable income associated with a change in accounting methods. (Ch 9-
30)
Abandoned Spouse
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
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
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
, Page 3 of 36
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
A fixed period of time win which a business reports income and deductions. (Ch 9-
13)
Accrual Method
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
A tax assessed on corporations that retain earning without a business reason to do
so. (Ch 15-3)
Acquiescence
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
An IRS pronouncement that explains the background reasoning behind an IRS
acquiescence or nonacquiescence . (Ch 2-17)
Ad Valorem
A type of tax based on the value of property. (Ch 1-15)
Additional Medicare Tax
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
, Page 4 of 36
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
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
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
A support payment of cash made to a former spouse. (Ch 5-14)
All Events Test
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
A concept that says: Gross income means all income from whatever source derived.
(Ch 4-2)
Allowance Method
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
WGU - C237 - TAXATION 1 SUMMARIZED NOTES MOST
COMPREHENSIVE 2026 QUESTIONS EXAM LATEST
VERSION SOLVED QUESTIONS & ANSWERS VERIFIED
100 %
30
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)
90
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)
12 Month Rule
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
Depreciable or real property used in a taxpayers trade or business owned for more
than one year. (Ch 11-8)
1231 Look Back Rule
, Page 2 of 36
A tax rule requiring taxpayers to treat current year net (Ch 11-18)
1245 Property
Tangible personal property and intangible property subject to cost recovery
deductions. (Ch 11-10)
1250 Property
Real property subject to cost recovery deductions. (Ch 11-14)
291 Depreciation Recapture
The portion of a corporate taxpayer's gain on real property that is converted from
1231 gain to ordinary income. (Ch 11-14)
481 Adjustment
A change to taxable income associated with a change in accounting methods. (Ch 9-
30)
Abandoned Spouse
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
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
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
, Page 3 of 36
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
A fixed period of time win which a business reports income and deductions. (Ch 9-
13)
Accrual Method
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
A tax assessed on corporations that retain earning without a business reason to do
so. (Ch 15-3)
Acquiescence
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
An IRS pronouncement that explains the background reasoning behind an IRS
acquiescence or nonacquiescence . (Ch 2-17)
Ad Valorem
A type of tax based on the value of property. (Ch 1-15)
Additional Medicare Tax
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
, Page 4 of 36
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
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
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
A support payment of cash made to a former spouse. (Ch 5-14)
All Events Test
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
A concept that says: Gross income means all income from whatever source derived.
(Ch 4-2)
Allowance Method
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
