WGU C237 Taxation I Exam 173 Questions with
Verified Answers
1913 - CORRECT ANSWER What year was the US income tax on individuals
permanently established?
Internal Revenue Code - CORRECT ANSWER What is the second-highest level of
legislative authority of tax law in the United States?
Revenue Rulings - CORRECT ANSWER In which publications does the IRS provide
information on the tax consequences of specific transactions encountered in
practice?
Each taxpayer pays a different amount based on their income level - CORRECT
ANSWER How are tax systems evaluated in terms of equity?
When two taxpayers in similar situations pay the same tax. - CORRECT ANSWER
What is horizontal equity?
The rate of tax increases as the tax base increases. - CORRECT ANSWER What is
the nature of a progressive tax rate structure?
Regressive - CORRECT ANSWER Which tax rate structure is exemplified by the FICA
portion of Social Security taxes?
,Property tax - CORRECT ANSWER Which tax is based on the value of an
individual's real estate?
Limited Liability Partnerships - CORRECT ANSWER What entities are considered
flow-through entities in the U.S. tax system?
6 years - CORRECT ANSWER A taxpayer fails to report income that exceeds 25% of
reported gross income but files the return on time. How many years after a return
was originally due might the statute of limitations expire?
Tax planning - CORRECT ANSWER Which component of a tax practice focuses on
minimizing taxes paid and maximizing after-tax cash flows while accommodating
clients' other desires?
U.S. Supreme Court - CORRECT ANSWER Which court's cases take precedence
over all other court decisions?
Court decisions - CORRECT ANSWER Which item is a source of tax law from the
judicial branch of government?
Internal Revenue Code - CORRECT ANSWER Which item is a legislative source of
tax law?
They have the highest authoritative weight of the administrative sources. -
CORRECT ANSWER What describes the authoritative weight carried by treasure
regulations?
,Itemized deductions - CORRECT ANSWER Which tax term defines a personal
expenditure, such as charitable contributions and medical expenses, which
taxpayers may claim if they keep records?
Money that is earned- both recorded and received. - CORRECT ANSWER What is
realization of income?
Rent and textbooks - CORRECT ANSWER What are two expenses that are a tax-
free use of a qualified tuition plan distribution?
Forgiveness of mortgage debt on rental property - CORRECT ANSWER What is one
event that would result in taxable income?
Head of household - CORRECT ANSWER Which tax status provides the largest
standard deduction for a divorced single parent with sole custody of a child?
Head of household - CORRECT ANSWER A taxpayer is a 60-year old widow whose
widowed mother qualifies as the taxpayer's dependent. The taxpayer has a
taxable income of $60,000. Which available filing status will provide the lowest tax
liability for this taxpayer?
Individual recovery credit - CORRECT ANSWER What is one tax credit that applies
to individuals for 2021?
Earned income credit - CORRECT ANSWER What is an example of a credit that is a
refundable tax credit?
, Rental home - CORRECT ANSWER Which mortgage interest expense is a reduction
for AGI?
It allows deduction of retirement contributions - CORRECT ANSWER What is a role
of deductions from AGI, excluding the qualified business income deduction (QBI)?
Interest on a loan to purchase land for an investment? - CORRECT ANSWER What
is an example of something that is deductible as an investment expense?
Property taxes paid on a medical office. - CORRECT ANSWER What is an example
of an item that is deductible as a business expense if a doctor invests personal
money in various properties?
Repairing a leak in the roof of the building. - CORRECT ANSWER A taxpayer runs
an automotive repair business in a building he owns. The income and expenses
are reported on Form 1040, Schedule C. There was no section 179 election made.
What is an example of an action that represents a deductible business expense for
the current tax year and is therefore not subject to capitalization and
depreciation?
Purchase of a 12-month liability insurance policy? - CORRECT ANSWER What is an
example of a deductible business expense?
An unrealized gain - CORRECT ANSWER Which type of gain does a taxpayer have if
the taxpayer owns stock that has appreciated in value?
Verified Answers
1913 - CORRECT ANSWER What year was the US income tax on individuals
permanently established?
Internal Revenue Code - CORRECT ANSWER What is the second-highest level of
legislative authority of tax law in the United States?
Revenue Rulings - CORRECT ANSWER In which publications does the IRS provide
information on the tax consequences of specific transactions encountered in
practice?
Each taxpayer pays a different amount based on their income level - CORRECT
ANSWER How are tax systems evaluated in terms of equity?
When two taxpayers in similar situations pay the same tax. - CORRECT ANSWER
What is horizontal equity?
The rate of tax increases as the tax base increases. - CORRECT ANSWER What is
the nature of a progressive tax rate structure?
Regressive - CORRECT ANSWER Which tax rate structure is exemplified by the FICA
portion of Social Security taxes?
,Property tax - CORRECT ANSWER Which tax is based on the value of an
individual's real estate?
Limited Liability Partnerships - CORRECT ANSWER What entities are considered
flow-through entities in the U.S. tax system?
6 years - CORRECT ANSWER A taxpayer fails to report income that exceeds 25% of
reported gross income but files the return on time. How many years after a return
was originally due might the statute of limitations expire?
Tax planning - CORRECT ANSWER Which component of a tax practice focuses on
minimizing taxes paid and maximizing after-tax cash flows while accommodating
clients' other desires?
U.S. Supreme Court - CORRECT ANSWER Which court's cases take precedence
over all other court decisions?
Court decisions - CORRECT ANSWER Which item is a source of tax law from the
judicial branch of government?
Internal Revenue Code - CORRECT ANSWER Which item is a legislative source of
tax law?
They have the highest authoritative weight of the administrative sources. -
CORRECT ANSWER What describes the authoritative weight carried by treasure
regulations?
,Itemized deductions - CORRECT ANSWER Which tax term defines a personal
expenditure, such as charitable contributions and medical expenses, which
taxpayers may claim if they keep records?
Money that is earned- both recorded and received. - CORRECT ANSWER What is
realization of income?
Rent and textbooks - CORRECT ANSWER What are two expenses that are a tax-
free use of a qualified tuition plan distribution?
Forgiveness of mortgage debt on rental property - CORRECT ANSWER What is one
event that would result in taxable income?
Head of household - CORRECT ANSWER Which tax status provides the largest
standard deduction for a divorced single parent with sole custody of a child?
Head of household - CORRECT ANSWER A taxpayer is a 60-year old widow whose
widowed mother qualifies as the taxpayer's dependent. The taxpayer has a
taxable income of $60,000. Which available filing status will provide the lowest tax
liability for this taxpayer?
Individual recovery credit - CORRECT ANSWER What is one tax credit that applies
to individuals for 2021?
Earned income credit - CORRECT ANSWER What is an example of a credit that is a
refundable tax credit?
, Rental home - CORRECT ANSWER Which mortgage interest expense is a reduction
for AGI?
It allows deduction of retirement contributions - CORRECT ANSWER What is a role
of deductions from AGI, excluding the qualified business income deduction (QBI)?
Interest on a loan to purchase land for an investment? - CORRECT ANSWER What
is an example of something that is deductible as an investment expense?
Property taxes paid on a medical office. - CORRECT ANSWER What is an example
of an item that is deductible as a business expense if a doctor invests personal
money in various properties?
Repairing a leak in the roof of the building. - CORRECT ANSWER A taxpayer runs
an automotive repair business in a building he owns. The income and expenses
are reported on Form 1040, Schedule C. There was no section 179 election made.
What is an example of an action that represents a deductible business expense for
the current tax year and is therefore not subject to capitalization and
depreciation?
Purchase of a 12-month liability insurance policy? - CORRECT ANSWER What is an
example of a deductible business expense?
An unrealized gain - CORRECT ANSWER Which type of gain does a taxpayer have if
the taxpayer owns stock that has appreciated in value?
