WGU C239 UPDATED EXAM TEST 2026-2027 QUESTIONS
AND ANSWERS RATED A+
✔✔A client owns an apartment building with a fair market value of $250,000, an
adjusted basis of $175,000, and a mortgage of $150,000. The client exchanges the
building and $40,000 cash for a different apartment that has a fair market value of
$220,000. The client assumes the $80,000 mortgage on the building to be acquired.
Which tax amount will the client realize as a result of the exchange?
$0 gain or loss
$30,000 gain
$45,000 gain
$75,000 gain - ✔✔$75,000 gain
✔✔What should be deferred in an involuntary conversion?
Gain on the destruction of a principal residence
Gain on the immediate resale of replacement property
Loss on the immediate resale of replacement property
Loss on personal property compensated by insurance proceeds - ✔✔Gain on the
destruction of a principal residence
✔✔A taxpayer's bowling alley (basis of $600,000) is destroyed by fire, and he receives
$800,000 in insurance proceeds. The taxpayer will spend $1,000,000 to build another
bowling alley.
How much is the gain and could it be deferred under the functional-use test?
$200,000 gain; could defer
$200,000 gain; could not defer
$400,000 gain; could defer
$400,000 gain; could not defer - ✔✔$200,000 gain; could defer
✔✔Which provision found in the home sale rules encourages home ownership?
Interest on unsecured debt is deductible by an individual or married couple.
$500,000 of gain on sale of primary residence owned for two years may be excluded by
a single taxpayer.
Interest on up to $100,000 of home equity debt may be deducted.
$250,000 of gain on sale of primary residence owned for two years may be excluded by
a single taxpayer. - ✔✔$250,000 of gain on sale of primary residence owned for two
years may be excluded by a single taxpayer.
✔✔A taxpayer occupied a primary residence for one year and then sold the residence.
Which qualification is needed to exclude a gain from taxable income?
, Taxpayer moved because of taxpayer's marriage.
Taxpayer moved because of noise from nearby windmills.
Taxpayer moved to a different state to care for a recently injured friend.
Taxpayer moved to a different state to receive medical treatment for a significant health
issue. - ✔✔Taxpayer moved to a different state to receive medical treatment for a
significant health issue.
✔✔Which asset qualifies as Section 1231 property?
Timber owned by a company for at least six months and cut for sale
Timber owned by a company for at least one year and cut for sale
Timber owned by a company for at least six months and held for investment
Timber owned by a company for at least one year and held for investment - ✔✔Timber
owned by a company for at least one year and cut for sale
✔✔A taxpayer's gains and losses pertaining to business assets for the year are as
follows:
Gain due to insurance reimbursement for vehicle theft: $20,000
Loss due to insurance reimbursement for fire damage to a building: $(7,000)
Gain due to building condemnation: $2,000
Loss on sale of investment property: $(18,000)
There are no non-recaptured net section 1231 losses from previous years.
What is the tax treatment for the casualty and theft transactions?
Ordinary gain of $20,000
Ordinary loss of $25,000
Net section 1231 loss of $3,000
Net section 1231 gain of $13,000 - ✔✔Net section 1231 gain of $13,000
✔✔Business A is a calendar-year taxpayer and purchased office equipment for $10
million on March 1, 2018. The items were placed in service on May 1, 2018. The asset
has a 10-year recovery period for GAAP accounting purposes.
What is the amount of 2018 tax cost recovery on this asset?
$500,000
$952,381
$1,000,000
$1,428,571 - ✔✔$1,428,571 This is somewhat tricky. It states that it is 10yr for book, but
it is only 7yr for tax. MACRS for 7yr is 14.29% so 10,000,000 x 14.29%= 1,429,000
✔✔A taxpayer performs legal services (fair market value of $50,000) to a corporation in
exchange for 10% of its stock (fair market value of $70,000).
What is the immediate tax consequence to the taxpayer?
Recognize $20,000 gain
AND ANSWERS RATED A+
✔✔A client owns an apartment building with a fair market value of $250,000, an
adjusted basis of $175,000, and a mortgage of $150,000. The client exchanges the
building and $40,000 cash for a different apartment that has a fair market value of
$220,000. The client assumes the $80,000 mortgage on the building to be acquired.
Which tax amount will the client realize as a result of the exchange?
$0 gain or loss
$30,000 gain
$45,000 gain
$75,000 gain - ✔✔$75,000 gain
✔✔What should be deferred in an involuntary conversion?
Gain on the destruction of a principal residence
Gain on the immediate resale of replacement property
Loss on the immediate resale of replacement property
Loss on personal property compensated by insurance proceeds - ✔✔Gain on the
destruction of a principal residence
✔✔A taxpayer's bowling alley (basis of $600,000) is destroyed by fire, and he receives
$800,000 in insurance proceeds. The taxpayer will spend $1,000,000 to build another
bowling alley.
How much is the gain and could it be deferred under the functional-use test?
$200,000 gain; could defer
$200,000 gain; could not defer
$400,000 gain; could defer
$400,000 gain; could not defer - ✔✔$200,000 gain; could defer
✔✔Which provision found in the home sale rules encourages home ownership?
Interest on unsecured debt is deductible by an individual or married couple.
$500,000 of gain on sale of primary residence owned for two years may be excluded by
a single taxpayer.
Interest on up to $100,000 of home equity debt may be deducted.
$250,000 of gain on sale of primary residence owned for two years may be excluded by
a single taxpayer. - ✔✔$250,000 of gain on sale of primary residence owned for two
years may be excluded by a single taxpayer.
✔✔A taxpayer occupied a primary residence for one year and then sold the residence.
Which qualification is needed to exclude a gain from taxable income?
, Taxpayer moved because of taxpayer's marriage.
Taxpayer moved because of noise from nearby windmills.
Taxpayer moved to a different state to care for a recently injured friend.
Taxpayer moved to a different state to receive medical treatment for a significant health
issue. - ✔✔Taxpayer moved to a different state to receive medical treatment for a
significant health issue.
✔✔Which asset qualifies as Section 1231 property?
Timber owned by a company for at least six months and cut for sale
Timber owned by a company for at least one year and cut for sale
Timber owned by a company for at least six months and held for investment
Timber owned by a company for at least one year and held for investment - ✔✔Timber
owned by a company for at least one year and cut for sale
✔✔A taxpayer's gains and losses pertaining to business assets for the year are as
follows:
Gain due to insurance reimbursement for vehicle theft: $20,000
Loss due to insurance reimbursement for fire damage to a building: $(7,000)
Gain due to building condemnation: $2,000
Loss on sale of investment property: $(18,000)
There are no non-recaptured net section 1231 losses from previous years.
What is the tax treatment for the casualty and theft transactions?
Ordinary gain of $20,000
Ordinary loss of $25,000
Net section 1231 loss of $3,000
Net section 1231 gain of $13,000 - ✔✔Net section 1231 gain of $13,000
✔✔Business A is a calendar-year taxpayer and purchased office equipment for $10
million on March 1, 2018. The items were placed in service on May 1, 2018. The asset
has a 10-year recovery period for GAAP accounting purposes.
What is the amount of 2018 tax cost recovery on this asset?
$500,000
$952,381
$1,000,000
$1,428,571 - ✔✔$1,428,571 This is somewhat tricky. It states that it is 10yr for book, but
it is only 7yr for tax. MACRS for 7yr is 14.29% so 10,000,000 x 14.29%= 1,429,000
✔✔A taxpayer performs legal services (fair market value of $50,000) to a corporation in
exchange for 10% of its stock (fair market value of $70,000).
What is the immediate tax consequence to the taxpayer?
Recognize $20,000 gain
