WGU C239 CORE EXAMS SET 2026-2027 QUESTIONS AND
ANSWERS RATED A+
✔✔employment taxes - ✔✔Taxes that an employer must pay on account of its
employees. Employment taxes include FICA (Federal Insurance Contributions Act) and
FUTA (Federal Unemployment Tax Act) taxes. Employment taxes are paid to the IRS in
addition to income tax withholdings at specified intervals. Such taxes can be levied on
the employees, the employer, or both.
✔✔estate tax - ✔✔A tax imposed on the right to transfer property by death. Thus, an
estate tax is levied on the decedent's estate and not on the heir receiving the property. §
2001.
✔✔Estimated tax - ✔✔The amount of tax (including alternative minimum tax and self-
employment tax) a taxpayer expects to owe for the year after subtracting tax credits and
income tax withheld. The estimated tax must be paid in installments at designated
intervals (e.g., for a calendar year individual taxpayer, by April 15, June 15, September
15, and January 15 of the following year).
✔✔excise taxes - ✔✔A tax on the manufacture, sale, or use of goods; on the carrying
on of an occupation or activity; or on the transfer of property. Thus, the Federal estate
and gift taxes are, theoretically, excise taxes.
✔✔§ 179 expensing election - ✔✔The ability to deduct the cost of qualified property in
the year the property is placed in service rather than over the asset's useful life or cost
recovery period. The annual ceiling on the deduction is $1,050,000 in 2021 ($1,040,000
in 2020). However, the deduction is reduced dollar for dollar when § 179 property
placed in service during the taxable year exceeds $2,620,000 ($2,590,000 in 2020). In
addition, the amount expensed under § 179 cannot exceed the aggregate amount of
taxable income derived from the conduct of any trade or business by the taxpayer.
✔✔fair market value - ✔✔The amount at which property would change hands between
a willing buyer and a willing seller, neither being under any compulsion to buy or to sell
and both having reasonable knowledge of the relevant facts. Reg. §§ 1.1001-1(a) and
20.2031-1(b).
✔✔FICA tax - ✔✔An abbreviation that stands for Federal Insurance Contributions Act,
commonly referred to as the Social Security tax. The FICA tax is comprised of the
Social Security tax (old age, survivors, and disability insurance) and the Medicare tax
(hospital insurance) and is imposed on both employers and employees. The employer is
responsible for withholding from the employee's wages the Social Security tax at a rate
of 6.2 percent on a maximum wage base and the Medicare tax at a rate of 1.45 percent
(no maximum wage base). The maximum Social Security wage base for 2021 is
$142,800 and for 2020 is $137,700.
,✔✔filing status - ✔✔Individual taxpayers are placed in one of five filing statuses each
year (single, married filing jointly, married filing separately, surviving spouse, or head of
household). Marital status and household support are key determinants. Filing status is
used to determine the taxpayer's filing requirements, standard deduction, eligibility for
certain deductions and credits, and tax liability.
✔✔Final Regulations - ✔✔The U.S. Treasury Department Regulations (abbreviated
Reg.) represent the position of the IRS as to how the Internal Revenue Code is to be
interpreted. Their purpose is to provide taxpayers and IRS personnel with rules of
general and specific application to the various provisions of the tax law. Regulations are
published in the Federal Register and in all tax services.
✔✔Financial Accounting Standards Board (FASB) - ✔✔Guidelines relating to how to
construct the financial statements of enterprises doing business in the United States.
Promulgated chiefly by the Financial Accounting Standards Board (FASB).
✔✔Flexible spending plans - ✔✔An employee benefit plan that allows the employee to
take a reduction in salary in exchange for the employer paying benefits that can be
provided by the employer without the employee being required to recognize income
(e.g., medical and child care benefits). Contributions to a flexible spending plan are
limited to $2,750 for 2021. § 125(i).
✔✔flow-through entity - ✔✔The entity is a tax reporter rather than a taxpayer. The
owners are subject to tax. Examples are partnerships, S corporations, and limited
liability companies.
✔✔foreign earned income exclusion - ✔✔The Code allows exclusions for earned
income generated outside the United States to alleviate any tax base and rate
disparities among countries. In addition, the exclusion is allowed for housing
expenditures incurred by the taxpayer's employer with respect to the non-U.S.
assignment, and self-employed individuals can deduct foreign housing expenses
incurred in a trade or business. The exclusion is limited to $108,700 per year for 2021
($107,600 in 2020). § 911.
✔✔franchise tax - ✔✔A tax levied on the right to do business in a state as a
corporation. Although income considerations may come into play, the tax usually is
based on the capitalization of the corporation.
✔✔FUTA tax - ✔✔An employment tax levied on employers. Jointly administered by the
Federal and state governments, the tax provides funding for unemployment benefits.
FUTA applies at a rate of 6.0 percent on the first $7,000 of covered wages paid during
the year for each employee. The Federal government allows a credit for FUTA paid (or
allowed under a merit rating system) to the state. The credit cannot exceed 5.4 percent
of the covered wages. §§ 3301-3311.
, ✔✔§ 1231 gains and losses - ✔✔If the combined gains and losses from the taxable
dispositions of § 1231 assets plus the net gain from business involuntary conversions
(of both § 1231 assets and long-term capital assets) is a gain, the gains and losses are
treated as long-term capital gains and losses. In arriving at § 1231 gains, however, the
depreciation recapture provisions (e.g., § 1245) are applied first to produce ordinary
income. If the net result of the combination is a loss, the gains and losses from § 1231
assets are treated as ordinary gains and losses. § 1231(a).
✔✔general partnership (GP) - ✔✔A partnership that is owned by general partners
(only). Creditors of a general partnership can collect amounts owed them from both the
partnership assets and the assets of the partners individually.
✔✔Generally Accepted Accounting Principles (GAAP) - ✔✔Guidelines relating to how to
construct the financial statements of enterprises doing business in the United States.
Promulgated chiefly by the Financial Accounting Standards Board (FASB).
✔✔gift tax - ✔✔A tax imposed on the transfer of property by gift. The tax is imposed
upon the donor of a gift and is based on the fair market value of the property on the date
of the gift. § 2501.
✔✔goodwill - ✔✔The reputation and other unidentifiable intangible assets of a
company. For accounting purposes, goodwill has no basis unless it is purchased. In the
purchase of a business, goodwill generally is the difference between the purchase price
and the fair market value of the assets acquired. The intangible asset goodwill can be
amortized for tax purposes over a 15-year period. § 197 and Reg. § 1.167(a)-3.
✔✔guaranteed payment - ✔✔Payments made by a partnership to a partner for services
rendered or for the use of capital to the extent the payments are determined without
regard to the income of the partnership. The payments are treated as though they were
made to a nonpartner and thus are deducted by the entity. A guaranteed payment might
be subject to self-employment tax (guaranteed payment for services) or net investment
income tax (guaranteed payment for capital). Guaranteed payments are not eligible for
the qualified business income deduction.
✔✔half-year convention - ✔✔A cost recovery convention that assumes that property is
placed in service at mid-year and thus provides for a half-year's cost recovery for that
year. § 168(d).
✔✔head of household - ✔✔An unmarried individual who maintains a household for
another and satisfies certain conditions set forth in § 2(b). This status enables the
taxpayer to use a set of income tax rates that are lower than those applicable to other
unmarried individuals but higher than those applicable to surviving spouses and married
persons filing a joint return.
ANSWERS RATED A+
✔✔employment taxes - ✔✔Taxes that an employer must pay on account of its
employees. Employment taxes include FICA (Federal Insurance Contributions Act) and
FUTA (Federal Unemployment Tax Act) taxes. Employment taxes are paid to the IRS in
addition to income tax withholdings at specified intervals. Such taxes can be levied on
the employees, the employer, or both.
✔✔estate tax - ✔✔A tax imposed on the right to transfer property by death. Thus, an
estate tax is levied on the decedent's estate and not on the heir receiving the property. §
2001.
✔✔Estimated tax - ✔✔The amount of tax (including alternative minimum tax and self-
employment tax) a taxpayer expects to owe for the year after subtracting tax credits and
income tax withheld. The estimated tax must be paid in installments at designated
intervals (e.g., for a calendar year individual taxpayer, by April 15, June 15, September
15, and January 15 of the following year).
✔✔excise taxes - ✔✔A tax on the manufacture, sale, or use of goods; on the carrying
on of an occupation or activity; or on the transfer of property. Thus, the Federal estate
and gift taxes are, theoretically, excise taxes.
✔✔§ 179 expensing election - ✔✔The ability to deduct the cost of qualified property in
the year the property is placed in service rather than over the asset's useful life or cost
recovery period. The annual ceiling on the deduction is $1,050,000 in 2021 ($1,040,000
in 2020). However, the deduction is reduced dollar for dollar when § 179 property
placed in service during the taxable year exceeds $2,620,000 ($2,590,000 in 2020). In
addition, the amount expensed under § 179 cannot exceed the aggregate amount of
taxable income derived from the conduct of any trade or business by the taxpayer.
✔✔fair market value - ✔✔The amount at which property would change hands between
a willing buyer and a willing seller, neither being under any compulsion to buy or to sell
and both having reasonable knowledge of the relevant facts. Reg. §§ 1.1001-1(a) and
20.2031-1(b).
✔✔FICA tax - ✔✔An abbreviation that stands for Federal Insurance Contributions Act,
commonly referred to as the Social Security tax. The FICA tax is comprised of the
Social Security tax (old age, survivors, and disability insurance) and the Medicare tax
(hospital insurance) and is imposed on both employers and employees. The employer is
responsible for withholding from the employee's wages the Social Security tax at a rate
of 6.2 percent on a maximum wage base and the Medicare tax at a rate of 1.45 percent
(no maximum wage base). The maximum Social Security wage base for 2021 is
$142,800 and for 2020 is $137,700.
,✔✔filing status - ✔✔Individual taxpayers are placed in one of five filing statuses each
year (single, married filing jointly, married filing separately, surviving spouse, or head of
household). Marital status and household support are key determinants. Filing status is
used to determine the taxpayer's filing requirements, standard deduction, eligibility for
certain deductions and credits, and tax liability.
✔✔Final Regulations - ✔✔The U.S. Treasury Department Regulations (abbreviated
Reg.) represent the position of the IRS as to how the Internal Revenue Code is to be
interpreted. Their purpose is to provide taxpayers and IRS personnel with rules of
general and specific application to the various provisions of the tax law. Regulations are
published in the Federal Register and in all tax services.
✔✔Financial Accounting Standards Board (FASB) - ✔✔Guidelines relating to how to
construct the financial statements of enterprises doing business in the United States.
Promulgated chiefly by the Financial Accounting Standards Board (FASB).
✔✔Flexible spending plans - ✔✔An employee benefit plan that allows the employee to
take a reduction in salary in exchange for the employer paying benefits that can be
provided by the employer without the employee being required to recognize income
(e.g., medical and child care benefits). Contributions to a flexible spending plan are
limited to $2,750 for 2021. § 125(i).
✔✔flow-through entity - ✔✔The entity is a tax reporter rather than a taxpayer. The
owners are subject to tax. Examples are partnerships, S corporations, and limited
liability companies.
✔✔foreign earned income exclusion - ✔✔The Code allows exclusions for earned
income generated outside the United States to alleviate any tax base and rate
disparities among countries. In addition, the exclusion is allowed for housing
expenditures incurred by the taxpayer's employer with respect to the non-U.S.
assignment, and self-employed individuals can deduct foreign housing expenses
incurred in a trade or business. The exclusion is limited to $108,700 per year for 2021
($107,600 in 2020). § 911.
✔✔franchise tax - ✔✔A tax levied on the right to do business in a state as a
corporation. Although income considerations may come into play, the tax usually is
based on the capitalization of the corporation.
✔✔FUTA tax - ✔✔An employment tax levied on employers. Jointly administered by the
Federal and state governments, the tax provides funding for unemployment benefits.
FUTA applies at a rate of 6.0 percent on the first $7,000 of covered wages paid during
the year for each employee. The Federal government allows a credit for FUTA paid (or
allowed under a merit rating system) to the state. The credit cannot exceed 5.4 percent
of the covered wages. §§ 3301-3311.
, ✔✔§ 1231 gains and losses - ✔✔If the combined gains and losses from the taxable
dispositions of § 1231 assets plus the net gain from business involuntary conversions
(of both § 1231 assets and long-term capital assets) is a gain, the gains and losses are
treated as long-term capital gains and losses. In arriving at § 1231 gains, however, the
depreciation recapture provisions (e.g., § 1245) are applied first to produce ordinary
income. If the net result of the combination is a loss, the gains and losses from § 1231
assets are treated as ordinary gains and losses. § 1231(a).
✔✔general partnership (GP) - ✔✔A partnership that is owned by general partners
(only). Creditors of a general partnership can collect amounts owed them from both the
partnership assets and the assets of the partners individually.
✔✔Generally Accepted Accounting Principles (GAAP) - ✔✔Guidelines relating to how to
construct the financial statements of enterprises doing business in the United States.
Promulgated chiefly by the Financial Accounting Standards Board (FASB).
✔✔gift tax - ✔✔A tax imposed on the transfer of property by gift. The tax is imposed
upon the donor of a gift and is based on the fair market value of the property on the date
of the gift. § 2501.
✔✔goodwill - ✔✔The reputation and other unidentifiable intangible assets of a
company. For accounting purposes, goodwill has no basis unless it is purchased. In the
purchase of a business, goodwill generally is the difference between the purchase price
and the fair market value of the assets acquired. The intangible asset goodwill can be
amortized for tax purposes over a 15-year period. § 197 and Reg. § 1.167(a)-3.
✔✔guaranteed payment - ✔✔Payments made by a partnership to a partner for services
rendered or for the use of capital to the extent the payments are determined without
regard to the income of the partnership. The payments are treated as though they were
made to a nonpartner and thus are deducted by the entity. A guaranteed payment might
be subject to self-employment tax (guaranteed payment for services) or net investment
income tax (guaranteed payment for capital). Guaranteed payments are not eligible for
the qualified business income deduction.
✔✔half-year convention - ✔✔A cost recovery convention that assumes that property is
placed in service at mid-year and thus provides for a half-year's cost recovery for that
year. § 168(d).
✔✔head of household - ✔✔An unmarried individual who maintains a household for
another and satisfies certain conditions set forth in § 2(b). This status enables the
taxpayer to use a set of income tax rates that are lower than those applicable to other
unmarried individuals but higher than those applicable to surviving spouses and married
persons filing a joint return.
