WGU C237 TAXATION 1 EXAM QUESTIONS WITH CORRECT
05/13/2026
ANSWERS 2026/2027
WGU C237 Taxation 1 Exam Questions With Correct Answers
2026/2027, Quizzes of Business Taxation and Tax Management
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
A tax rule requiring taxpayers to treat current year net (Ch 11-18)
5/13/2026
1
, WGU C237 TAXATION 1 EXAM QUESTIONS WITH CORRECT
05/13/2026
ANSWERS 2026/2027
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)
5/13/2026
Accountable Plan
2
, WGU C237 TAXATION 1 EXAM QUESTIONS WITH CORRECT
05/13/2026
ANSWERS 2026/2027
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
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)
5/13/2026
3
, WGU C237 TAXATION 1 EXAM QUESTIONS WITH CORRECT
05/13/2026
ANSWERS 2026/2027
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
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)
5/13/2026
4
05/13/2026
ANSWERS 2026/2027
WGU C237 Taxation 1 Exam Questions With Correct Answers
2026/2027, Quizzes of Business Taxation and Tax Management
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
A tax rule requiring taxpayers to treat current year net (Ch 11-18)
5/13/2026
1
, WGU C237 TAXATION 1 EXAM QUESTIONS WITH CORRECT
05/13/2026
ANSWERS 2026/2027
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)
5/13/2026
Accountable Plan
2
, WGU C237 TAXATION 1 EXAM QUESTIONS WITH CORRECT
05/13/2026
ANSWERS 2026/2027
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
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)
5/13/2026
3
, WGU C237 TAXATION 1 EXAM QUESTIONS WITH CORRECT
05/13/2026
ANSWERS 2026/2027
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
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)
5/13/2026
4
