WGU C237 TAXATION 1 STUDY GUIDE 2025/2026
QUESTIONS AND ANSWERS GUARANTEE A+
✔✔$1200 - ✔✔Single taxpayer bought stock 14 months ago, 100 shares at $75 and
bought stock 13 months ago, 100 shares at $45, sold all 200 shares today for $100 a
share. Taxpayer's Taxable income is $55,000. The capital gain rate is 15%. What are
the taxes owed on the stock?
✔✔A personal residence
Stock held by business for investment purposes - ✔✔Which items are capital assets?
Pick 2
✔✔$100 - ✔✔Grandma Charity purchased 10 shares of Disney Stock on June 15,
1989, for $10 a share, total purchase cost $100. In honor of Sadie, her favorite
granddaughter, on her 18th birthday she gave her the stock. FMV at the time of gift
$146 a share total value $1460. What is Sadie's basis in the gift?
✔✔repaired machine - ✔✔Which item represents a deductible business expense?
✔✔$4000
◦MACRS - Modified Accelerated Cost Recovery System. To determine depreciation,
need to know
◦initial basis, date placed in service, what depreciation method, asset recovery period.
◦Truck $20,000 x 20% 5-year asset = $4,000
◦Computer $10,000 x 20% 5 year = $2,000
◦Furniture $5,000 x 14.29% 7 year = $715
◦Total Depreciation $6715 - ✔✔Just Hats Inc. A small business located in
Punxsutawney, PA, that specializes in selling top hats spent $20,000 for a slightly used
Ford Transit Connect, a light truck on February 5. The business is going to have the
truck wrapped so it looks like a giant top hat driving down the street. With hat sales
going through the roof the business buy a new computer system on June 25 for
$10,000. To furnish the new back office, the business buys new office furniture on
November 14 for the cost of $5000. What is the MACRS depreciation deduction for the
truck?
✔✔$41,730
•Year 1 Month 6 = 1.391%
•3,400,000 - $400,000 = $3,000,000 x 1.391%= $41,730 - ✔✔A business purchased
commercial property (building and land) for a total of $3,400,000. The land value of the
purchase was estimated to be $400,000. The property was purchased in June, the
business uses a calendar year. What is the Modified Accelerated Cost Recovery
System (MACRS) depreciation deduction for the building for year one?
, ✔✔Over the counter medicines - ✔✔What medical expenses is not a qualified as an
itemized deduction?
✔✔Rental property expenses
•For adjusted gross income - before you get to AGI, Business Deductions
•From adjusted gross income - after AGI - take either standard deduction or itemized,
whatever is bigger - ONLY GET ONE! - ✔✔Which expense is a reduction for adjusted
gross income?
✔✔$14,137
◦Medical itemized deductions are a floor. You have to spend more than the floor to get a
deduction. Take AGI $67,500 x 7.5% = $5062.50 (floor) rounded up to $5063. Medical
expenses were $7200 - $5063 = $2137
◦Medical $2137 + property tax $4000 + Charity $3000 + Mortgage interest $5,000 =
$14,137 - ✔✔It's time for Suzy Sunshine, a 35-year-old taxpayer to do her taxes. She
wants to calculate her itemized deduction. In 2021 she paid $4000 in property tax,
received a $500 tax refund, donated $3000 to qualified charities, paid $5,000 in
mortgage interest for her house, spent $7200 on medical expenses and paid her
accountant $350 to prepare her taxes. Her adjusted gross income is $67,500. Suzie's
itemized deductions would be?
✔✔50% - ✔✔What is the maximum charitable contribution deduction for stock (an
intangible capital gain property) given to a Public Charity?
✔✔Gambling losses to extent of winnings - ✔✔What is a Miscellaneous Deduction
allowed in 2021?
✔✔Head of Household - ✔✔Cynthia husband died last tax year. She has not remarried,
and she supports her elderly mother. What is Cynthia's tax filing status?
✔✔$2500 per each qualified dependent - ✔✔What is the American Opportunity Credit
maximum deduction?
✔✔A taxpayer with at least one qualifying child or a taxpayer who is at least 19 years of
age at year end (18 if in foster system) - ✔✔Who is a qualified individual under the
Earned Income Credit?
✔✔$9600
•Child tax credit for 2021. Children under the age of 18 is $3000 a head. If the Child(ren)
is under the age of 6 is $3600 a head. - ✔✔Head of Household taxpayer with an AGI of
QUESTIONS AND ANSWERS GUARANTEE A+
✔✔$1200 - ✔✔Single taxpayer bought stock 14 months ago, 100 shares at $75 and
bought stock 13 months ago, 100 shares at $45, sold all 200 shares today for $100 a
share. Taxpayer's Taxable income is $55,000. The capital gain rate is 15%. What are
the taxes owed on the stock?
✔✔A personal residence
Stock held by business for investment purposes - ✔✔Which items are capital assets?
Pick 2
✔✔$100 - ✔✔Grandma Charity purchased 10 shares of Disney Stock on June 15,
1989, for $10 a share, total purchase cost $100. In honor of Sadie, her favorite
granddaughter, on her 18th birthday she gave her the stock. FMV at the time of gift
$146 a share total value $1460. What is Sadie's basis in the gift?
✔✔repaired machine - ✔✔Which item represents a deductible business expense?
✔✔$4000
◦MACRS - Modified Accelerated Cost Recovery System. To determine depreciation,
need to know
◦initial basis, date placed in service, what depreciation method, asset recovery period.
◦Truck $20,000 x 20% 5-year asset = $4,000
◦Computer $10,000 x 20% 5 year = $2,000
◦Furniture $5,000 x 14.29% 7 year = $715
◦Total Depreciation $6715 - ✔✔Just Hats Inc. A small business located in
Punxsutawney, PA, that specializes in selling top hats spent $20,000 for a slightly used
Ford Transit Connect, a light truck on February 5. The business is going to have the
truck wrapped so it looks like a giant top hat driving down the street. With hat sales
going through the roof the business buy a new computer system on June 25 for
$10,000. To furnish the new back office, the business buys new office furniture on
November 14 for the cost of $5000. What is the MACRS depreciation deduction for the
truck?
✔✔$41,730
•Year 1 Month 6 = 1.391%
•3,400,000 - $400,000 = $3,000,000 x 1.391%= $41,730 - ✔✔A business purchased
commercial property (building and land) for a total of $3,400,000. The land value of the
purchase was estimated to be $400,000. The property was purchased in June, the
business uses a calendar year. What is the Modified Accelerated Cost Recovery
System (MACRS) depreciation deduction for the building for year one?
, ✔✔Over the counter medicines - ✔✔What medical expenses is not a qualified as an
itemized deduction?
✔✔Rental property expenses
•For adjusted gross income - before you get to AGI, Business Deductions
•From adjusted gross income - after AGI - take either standard deduction or itemized,
whatever is bigger - ONLY GET ONE! - ✔✔Which expense is a reduction for adjusted
gross income?
✔✔$14,137
◦Medical itemized deductions are a floor. You have to spend more than the floor to get a
deduction. Take AGI $67,500 x 7.5% = $5062.50 (floor) rounded up to $5063. Medical
expenses were $7200 - $5063 = $2137
◦Medical $2137 + property tax $4000 + Charity $3000 + Mortgage interest $5,000 =
$14,137 - ✔✔It's time for Suzy Sunshine, a 35-year-old taxpayer to do her taxes. She
wants to calculate her itemized deduction. In 2021 she paid $4000 in property tax,
received a $500 tax refund, donated $3000 to qualified charities, paid $5,000 in
mortgage interest for her house, spent $7200 on medical expenses and paid her
accountant $350 to prepare her taxes. Her adjusted gross income is $67,500. Suzie's
itemized deductions would be?
✔✔50% - ✔✔What is the maximum charitable contribution deduction for stock (an
intangible capital gain property) given to a Public Charity?
✔✔Gambling losses to extent of winnings - ✔✔What is a Miscellaneous Deduction
allowed in 2021?
✔✔Head of Household - ✔✔Cynthia husband died last tax year. She has not remarried,
and she supports her elderly mother. What is Cynthia's tax filing status?
✔✔$2500 per each qualified dependent - ✔✔What is the American Opportunity Credit
maximum deduction?
✔✔A taxpayer with at least one qualifying child or a taxpayer who is at least 19 years of
age at year end (18 if in foster system) - ✔✔Who is a qualified individual under the
Earned Income Credit?
✔✔$9600
•Child tax credit for 2021. Children under the age of 18 is $3000 a head. If the Child(ren)
is under the age of 6 is $3600 a head. - ✔✔Head of Household taxpayer with an AGI of
