WGU C239 TEST PAPER EXAM 2026-2027 QUESTIONS AND
ANSWERS RATED A+
✔✔A corporation is undergoing a complete liquidation and distributes land to an
individual shareholder in exchange for all of the shareholder's stock.
The land has a basis of $300,000 and a FMV of $400,000 on the corporation's books
and also has a $325,000 liability. The shareholder assumes the liability on the property,
and their basis in the corporation's stock is $100,000.
Which gain or loss must the shareholder recognize on the distribution?
$25,000 gain
$25,000 loss
$75,000 gain
$75,000 loss - ✔✔$25,000 loss
✔✔C Corporation owns 100% of the stock of B Corporation. The adjusted basis of its
stock investment is $100,000. A plan of liquidation is adopted.
B Corporation distributes to C Corporation assets with a $325,000 FMV and a $275,000
adjusted basis. B also distributes liabilities in the amount of $40,000. B Corporation has
a $150,000 earnings and profit (E & P) balance.
What is C Corporation's gain and/or loss on the redemption of B Corporation's stock?
$50,000 realized gain, but no recognized gain
$150,000 realized and recognized gain
$185,000 realized gain, but no recognized gain
$225,000 realized and recognized gain - ✔✔$185,000 realized gain, but no recognized
gain
✔✔A liquidating corporation does not recognize loss if the property is distributed to a
related party and the asset distributed is disqualified property.
Which property would be considered disqualified property?
Acquired within 18 months of the date of distribution
Acquired within 12 months of the date of distribution
Acquired within five years of the date of distribution
Acquired within three years of the date of distribution - ✔✔Acquired within five years of
the date of distribution
✔✔A limited liability company (LLC) is expected to earn $200,000 in annual profits. The
LLC is owned equally by three people who have no other income.
What is the appropriate tax-minimizing entity classification decision for this business?
Disregarded entity
Partnership
, S corporation
C corporation - ✔✔S corporation
✔✔A taxpayer is single with no dependents and has a taxable income of $50,000.
What is the taxpayer's federal income tax using the tax rate schedule?
$5,810
$6,000
$6,940
$11,000 - ✔✔$6,940
If your taxable income is:
Over - But not over - The tax is:
$0 -$9,525 10% of the amount over $0
$9,525-$38,700 $952.50+ 12% of the amount over $9,525
$38,700-$82,500 $4,453.50 + 22% of the amount over $38,700
✔✔Where does a self-employed person operating as a sole proprietorship report fees
received and expenses incurred in such a proprietorship on an individual tax return?
Schedule C, profit and loss
Form 1040, line on wages
Schedule E, supplemental income and loss
Form 1040, line on hobby income - ✔✔Schedule C, profit and loss
✔✔Which tax rate should tax professionals use in planning for tax clients?
Marginal tax rate
Average tax rate
Effective tax rate
Adjusted tax rate - ✔✔Marginal tax rate
✔✔Which type of insurance premium is an itemized deduction for tax purposes?
Life
Disability
Long-term care
Accidental death - ✔✔Long-term care
✔✔What is allowed by the multiple support declaration (Form 2120)?
A custodial parent to claim another person as a dependent
A non-custodial parent to claim another person as a dependent
A taxpayer to claim another person as a dependent without providing over one-half of
support
ANSWERS RATED A+
✔✔A corporation is undergoing a complete liquidation and distributes land to an
individual shareholder in exchange for all of the shareholder's stock.
The land has a basis of $300,000 and a FMV of $400,000 on the corporation's books
and also has a $325,000 liability. The shareholder assumes the liability on the property,
and their basis in the corporation's stock is $100,000.
Which gain or loss must the shareholder recognize on the distribution?
$25,000 gain
$25,000 loss
$75,000 gain
$75,000 loss - ✔✔$25,000 loss
✔✔C Corporation owns 100% of the stock of B Corporation. The adjusted basis of its
stock investment is $100,000. A plan of liquidation is adopted.
B Corporation distributes to C Corporation assets with a $325,000 FMV and a $275,000
adjusted basis. B also distributes liabilities in the amount of $40,000. B Corporation has
a $150,000 earnings and profit (E & P) balance.
What is C Corporation's gain and/or loss on the redemption of B Corporation's stock?
$50,000 realized gain, but no recognized gain
$150,000 realized and recognized gain
$185,000 realized gain, but no recognized gain
$225,000 realized and recognized gain - ✔✔$185,000 realized gain, but no recognized
gain
✔✔A liquidating corporation does not recognize loss if the property is distributed to a
related party and the asset distributed is disqualified property.
Which property would be considered disqualified property?
Acquired within 18 months of the date of distribution
Acquired within 12 months of the date of distribution
Acquired within five years of the date of distribution
Acquired within three years of the date of distribution - ✔✔Acquired within five years of
the date of distribution
✔✔A limited liability company (LLC) is expected to earn $200,000 in annual profits. The
LLC is owned equally by three people who have no other income.
What is the appropriate tax-minimizing entity classification decision for this business?
Disregarded entity
Partnership
, S corporation
C corporation - ✔✔S corporation
✔✔A taxpayer is single with no dependents and has a taxable income of $50,000.
What is the taxpayer's federal income tax using the tax rate schedule?
$5,810
$6,000
$6,940
$11,000 - ✔✔$6,940
If your taxable income is:
Over - But not over - The tax is:
$0 -$9,525 10% of the amount over $0
$9,525-$38,700 $952.50+ 12% of the amount over $9,525
$38,700-$82,500 $4,453.50 + 22% of the amount over $38,700
✔✔Where does a self-employed person operating as a sole proprietorship report fees
received and expenses incurred in such a proprietorship on an individual tax return?
Schedule C, profit and loss
Form 1040, line on wages
Schedule E, supplemental income and loss
Form 1040, line on hobby income - ✔✔Schedule C, profit and loss
✔✔Which tax rate should tax professionals use in planning for tax clients?
Marginal tax rate
Average tax rate
Effective tax rate
Adjusted tax rate - ✔✔Marginal tax rate
✔✔Which type of insurance premium is an itemized deduction for tax purposes?
Life
Disability
Long-term care
Accidental death - ✔✔Long-term care
✔✔What is allowed by the multiple support declaration (Form 2120)?
A custodial parent to claim another person as a dependent
A non-custodial parent to claim another person as a dependent
A taxpayer to claim another person as a dependent without providing over one-half of
support
