WGU C239 EXAM SCRIPT 2026-2027 QUESTIONS AND
ANSWERS RATED A+
✔✔Where is a corporation's non-business income allocated when computing the
corporation's state taxable income?
To multiple states per the functional test
To one state per the transaction test
To the state of the corporate headquarters of the payer
To each state where the income is earned - ✔✔To the state of the corporate
headquarters of the payer
✔✔What is a key operating element of doing business as an S corporation?
Fiscal year ends can be chosen without establishing a business purpose.
Corporate profits are taxed at the shareholders level in the year earned.
Shareholders are not subject to the at-risk or passive activity limitations.
Nontaxable fringe benefits are available to S corporation employee shareholders. -
✔✔Corporate profits are taxed at the shareholders level in the year earned.
✔✔Which activity of the tax advisor exemplifies the nature of tax compliance as a
closed situation?
Shaping the facts that detail the transaction
Planning for the facts that have not yet occurred
Considering the facts that have already occurred
Communicating the facts that detail the transaction - ✔✔Considering the facts that have
already occurred
✔✔What is a basic type of tax service?
Topical
Audited
Proprietary
Strategized - ✔✔Topical
The other type of service is Annotated.
✔✔A tax service arranged by the IRC section - ✔✔Annotated Tax Service
✔✔Commerce Clearing House's (CCH) Standard Federal Tax Reporter
Research Institute of America's (RIA) United States Tax Reporter - ✔✔examples of
annotated tax service
,✔✔Topical arrangement of services such as taxable forms of income, tax exempt
income, and trade or business expense - ✔✔Topical Tax Service
✔✔BNA's Tax Management Portfolios
CCH's Tax Research Consultant
RIA's Federal Tax Coordinator - ✔✔examples of topical tax services
✔✔1) understand facts
2) identify issues
3) locate relevant authorities
4) analyze tax authorities
5) document and communicate results - ✔✔Five steps for tax research
✔✔A corporation is audited by the IRS and does not agree with the findings. The case
has been heard by the U.S. Court of Federal Claims.
Which court does the company's tax attorney turn to next?
U.S. Tax Court
U.S. District Court
U.S. Supreme Court
U.S. Court of Appeals for Federal Circuit - ✔✔U.S. Court of Appeals for Federal Circuit
✔✔Which tax court has no appeals? - ✔✔US Tax Court Small Claims
✔✔The US Tax court and US District courts have the same authority. In which court can
appeals from these two courts be filed - ✔✔US. Circuit Court of Appeals (1st-11th
districts & DC Circuit)
✔✔Which court is the highest? - ✔✔US Supreme Court
✔✔What is the court hierarchy for the federal claims? - ✔✔US Court of Federal Claims -
> Us Circuit Court of Appeals (Federal Claims) -> US Supreme Court
✔✔What is the court hierarchy for other claims? - ✔✔US Tax Court OR US District
Court -> US Circuit Court of Appeals (Districts and DC) -> US Supreme Court
✔✔One taxpayer is a rancher who lives in Texas. One year the herd of cattle was
infested with hoof-and-mouth disease and had to be destroyed. The taxpayer's
insurance policy reimburses for an amount in excess of the tax basis in the cattle,
thereby creating an insurance gain.
Which tax form governs the treatment of this event?
Trade or business losses-Schedule C
Farm income or loss/Schedule F
, Sale or exchange of investment-Schedule D
Involuntary exclusion-Form 4797 - ✔✔Involuntary exclusion-Form 4797
✔✔Which form deals with Itemized Deductions? - ✔✔Schedule A
✔✔Which form deals with US Individual Income Tax Return? - ✔✔Form 1040
✔✔Which form deals with Interest and Ordinary Dividends? - ✔✔Schedule B
✔✔Which form deals with Profit or Loss from Business? - ✔✔Schedule C
✔✔Which form deals with Capital Gains and Losses? - ✔✔Schedule D
✔✔Which form deals with Sales and Other Dispositions of Capital Assets? - ✔✔Form
8949
✔✔Which form deals with Supplemental Income and Loss? - ✔✔Schedule E
✔✔Which form deals with Return of Partnership Income - ✔✔Form 1065
✔✔Which form deals with Beneficiary's Share of Income, Deductions, Credits, Etc.? -
✔✔Schedule K-1
✔✔Which form deals with Self-Employment Tax? - ✔✔Schedule SE
✔✔Which form deals with Corporation Income Tax Return? - ✔✔Form 1120
✔✔Which form deals with Income Tax from an S Corporation? - ✔✔Form 1120S
✔✔Which form deals with Shareholder's Share of Income, Deductions, Credit's, Etc.? -
✔✔Schedule K-1
✔✔Which form deals with Net Income (Loss) Reconciliation for Corporations -
✔✔Schedule M-3
✔✔Which form deals with Estate Tax Return? - ✔✔Form 706
✔✔Which form deals with Gift Tax Return? - ✔✔Form 709
✔✔Which term indicates the difference between the amount from sale or disposition of
an asset and the adjusted basis?
Realized gain (loss)
ANSWERS RATED A+
✔✔Where is a corporation's non-business income allocated when computing the
corporation's state taxable income?
To multiple states per the functional test
To one state per the transaction test
To the state of the corporate headquarters of the payer
To each state where the income is earned - ✔✔To the state of the corporate
headquarters of the payer
✔✔What is a key operating element of doing business as an S corporation?
Fiscal year ends can be chosen without establishing a business purpose.
Corporate profits are taxed at the shareholders level in the year earned.
Shareholders are not subject to the at-risk or passive activity limitations.
Nontaxable fringe benefits are available to S corporation employee shareholders. -
✔✔Corporate profits are taxed at the shareholders level in the year earned.
✔✔Which activity of the tax advisor exemplifies the nature of tax compliance as a
closed situation?
Shaping the facts that detail the transaction
Planning for the facts that have not yet occurred
Considering the facts that have already occurred
Communicating the facts that detail the transaction - ✔✔Considering the facts that have
already occurred
✔✔What is a basic type of tax service?
Topical
Audited
Proprietary
Strategized - ✔✔Topical
The other type of service is Annotated.
✔✔A tax service arranged by the IRC section - ✔✔Annotated Tax Service
✔✔Commerce Clearing House's (CCH) Standard Federal Tax Reporter
Research Institute of America's (RIA) United States Tax Reporter - ✔✔examples of
annotated tax service
,✔✔Topical arrangement of services such as taxable forms of income, tax exempt
income, and trade or business expense - ✔✔Topical Tax Service
✔✔BNA's Tax Management Portfolios
CCH's Tax Research Consultant
RIA's Federal Tax Coordinator - ✔✔examples of topical tax services
✔✔1) understand facts
2) identify issues
3) locate relevant authorities
4) analyze tax authorities
5) document and communicate results - ✔✔Five steps for tax research
✔✔A corporation is audited by the IRS and does not agree with the findings. The case
has been heard by the U.S. Court of Federal Claims.
Which court does the company's tax attorney turn to next?
U.S. Tax Court
U.S. District Court
U.S. Supreme Court
U.S. Court of Appeals for Federal Circuit - ✔✔U.S. Court of Appeals for Federal Circuit
✔✔Which tax court has no appeals? - ✔✔US Tax Court Small Claims
✔✔The US Tax court and US District courts have the same authority. In which court can
appeals from these two courts be filed - ✔✔US. Circuit Court of Appeals (1st-11th
districts & DC Circuit)
✔✔Which court is the highest? - ✔✔US Supreme Court
✔✔What is the court hierarchy for the federal claims? - ✔✔US Court of Federal Claims -
> Us Circuit Court of Appeals (Federal Claims) -> US Supreme Court
✔✔What is the court hierarchy for other claims? - ✔✔US Tax Court OR US District
Court -> US Circuit Court of Appeals (Districts and DC) -> US Supreme Court
✔✔One taxpayer is a rancher who lives in Texas. One year the herd of cattle was
infested with hoof-and-mouth disease and had to be destroyed. The taxpayer's
insurance policy reimburses for an amount in excess of the tax basis in the cattle,
thereby creating an insurance gain.
Which tax form governs the treatment of this event?
Trade or business losses-Schedule C
Farm income or loss/Schedule F
, Sale or exchange of investment-Schedule D
Involuntary exclusion-Form 4797 - ✔✔Involuntary exclusion-Form 4797
✔✔Which form deals with Itemized Deductions? - ✔✔Schedule A
✔✔Which form deals with US Individual Income Tax Return? - ✔✔Form 1040
✔✔Which form deals with Interest and Ordinary Dividends? - ✔✔Schedule B
✔✔Which form deals with Profit or Loss from Business? - ✔✔Schedule C
✔✔Which form deals with Capital Gains and Losses? - ✔✔Schedule D
✔✔Which form deals with Sales and Other Dispositions of Capital Assets? - ✔✔Form
8949
✔✔Which form deals with Supplemental Income and Loss? - ✔✔Schedule E
✔✔Which form deals with Return of Partnership Income - ✔✔Form 1065
✔✔Which form deals with Beneficiary's Share of Income, Deductions, Credits, Etc.? -
✔✔Schedule K-1
✔✔Which form deals with Self-Employment Tax? - ✔✔Schedule SE
✔✔Which form deals with Corporation Income Tax Return? - ✔✔Form 1120
✔✔Which form deals with Income Tax from an S Corporation? - ✔✔Form 1120S
✔✔Which form deals with Shareholder's Share of Income, Deductions, Credit's, Etc.? -
✔✔Schedule K-1
✔✔Which form deals with Net Income (Loss) Reconciliation for Corporations -
✔✔Schedule M-3
✔✔Which form deals with Estate Tax Return? - ✔✔Form 706
✔✔Which form deals with Gift Tax Return? - ✔✔Form 709
✔✔Which term indicates the difference between the amount from sale or disposition of
an asset and the adjusted basis?
Realized gain (loss)
