WGU C239 MAIN EXAMINATION 2026-2027 QUESTIONS
AND ANSWERS RATED A+
✔✔multiple support agreement - ✔✔To qualify for a dependency exemption, the
support test must be satisfied. This requires that over 50 percent of the support of the
potential dependent be provided by the taxpayer. Where no one person provides more
than 50 percent of the support, a multiple support agreement enables a taxpayer to still
qualify for the dependency exemption. Any person who contributed more than 10
percent of the support is entitled to claim the exemption if each person in the group who
contributed more than 10 percent files a written consent (Form 2120). Each person who
is a party to the multiple support agreement must meet all of the other requirements for
claiming the dependency exemption. § 152(c).
✔✔Multistate Tax Commission (MTC) - ✔✔A regulatory body of the states that develops
operating rules and regulations for the implementation of the UDITPA and other
provisions that assign the total taxable income of a multistate corporation to specific
states.
✔✔net capital gain (NCG) - ✔✔The excess of the net long-term capital gain for the tax
year over the net short-term capital loss. The net capital gain of an individual taxpayer is
eligible for the alternative tax. § 1222(11).
✔✔net capital loss (NCL) - ✔✔The excess of the losses from sales or exchanges of
capital assets over the gains from sales or exchanges of such assets. Up to $3,000 per
year of the net capital loss may be deductible by noncorporate taxpayers against
ordinary income. The excess net capital loss carries over to future tax years. For
corporate taxpayers, the net capital loss cannot be offset against ordinary income, but it
can be carried back three years and forward five years to offset net capital gains. §§
1211, 1212, and 1221(10).
✔✔nexus - ✔✔The degree of activity that must be present before a taxing jurisdiction
has the right to impose a tax on an out-of-state entity. The rules for income tax nexus
are not the same as for sales tax nexus.
✔✔no-additional-cost service - ✔✔Services the employer may provide the employee at
no additional cost to the employer. Generally, the benefit is the ability to utilize the
employer's excess capacity (e.g., vacant seats on an airliner). Such amounts are
excludible from the recipient's gross income. § 132(b).
✔✔nonaccountable plan - ✔✔An expense reimbursement plan that does not have an
accountability feature. The result is that employee expenses are not deductible.
✔✔nonacquiescence - ✔✔Disagreement by the IRS on the result reached in certain
judicial decisions. Nonacq. or NA.
, ✔✔nontaxable exchange - ✔✔A transaction in which realized gains or losses are not
recognized. The recognition of gain or loss is postponed (deferred) until the property
received in the nontaxable exchange is subsequently disposed of in a taxable
transaction. Examples are § 1031 like-kind exchanges and § 1033 involuntary
conversions.
✔✔Notices - ✔✔A Notice is issued by the National Office of the IRS as official guidance
when such information is needed before the time it takes to issue a Final Regulation.
Such guidance is typically transitional until final guidance is issued. A Notice is
published in an Internal Revenue Bulletin (I.R.B.).
✔✔occupational taxes - ✔✔A tax imposed on various trades or businesses. A license
fee that enables a taxpayer to engage in a particular occupation.
✔✔office in the home expenses - ✔✔Employment and business-related expenses
attributable to the use of a residence (e.g., den or office) are allowed only if the portion
of the residence is exclusively used on a regular basis as a principal place of business
of the taxpayer or as a place of business that is used by patients, clients, or customers.
In computing the office in the home expenses, a taxpayer can use either the regular
method or simplified method. As a general rule, the regular method requires more effort
and recordkeeping but results in a larger deduction. Office in home expenses incurred
by an employee are not deductible for tax years after 2017 (and through 2025). § 280A.
✔✔Options - ✔✔The sale or exchange of an option to buy or sell property results in
capital gain or loss if the property is a capital asset. Generally, the closing of an option
transaction results in short-term capital gain or loss to the writer of the call and the
purchaser of the call option. § 1234.
✔✔ordinary and necessary - ✔✔Two tests for the deductibility of expenses incurred or
paid in connection with a trade or business; for the production or collection of income;
for the management, conservation, or maintenance of property held for the production
of income; or in connection with the determination, collection, or refund of any tax. An
expense is ordinary if it is common and accepted in the general industry or type of
activity in which the taxpayer is engaged. An expense is necessary if it is appropriate
and helpful in furthering the taxpayer's business or income-producing activity. §§ 162(a)
and 212.
✔✔Ordinary income property - ✔✔Property contributed to a charitable organization that,
if sold rather than contributed, would have resulted in other than long-term capital gain
to the donor (i.e., ordinary income property and short-term capital gain property).
Examples are inventory and capital assets held for less than the long-term holding
period. A contribution of ordinary income property must generally be valued at its fair
market value less the gain, if any, that would have been realized if sold. § 170(e).
AND ANSWERS RATED A+
✔✔multiple support agreement - ✔✔To qualify for a dependency exemption, the
support test must be satisfied. This requires that over 50 percent of the support of the
potential dependent be provided by the taxpayer. Where no one person provides more
than 50 percent of the support, a multiple support agreement enables a taxpayer to still
qualify for the dependency exemption. Any person who contributed more than 10
percent of the support is entitled to claim the exemption if each person in the group who
contributed more than 10 percent files a written consent (Form 2120). Each person who
is a party to the multiple support agreement must meet all of the other requirements for
claiming the dependency exemption. § 152(c).
✔✔Multistate Tax Commission (MTC) - ✔✔A regulatory body of the states that develops
operating rules and regulations for the implementation of the UDITPA and other
provisions that assign the total taxable income of a multistate corporation to specific
states.
✔✔net capital gain (NCG) - ✔✔The excess of the net long-term capital gain for the tax
year over the net short-term capital loss. The net capital gain of an individual taxpayer is
eligible for the alternative tax. § 1222(11).
✔✔net capital loss (NCL) - ✔✔The excess of the losses from sales or exchanges of
capital assets over the gains from sales or exchanges of such assets. Up to $3,000 per
year of the net capital loss may be deductible by noncorporate taxpayers against
ordinary income. The excess net capital loss carries over to future tax years. For
corporate taxpayers, the net capital loss cannot be offset against ordinary income, but it
can be carried back three years and forward five years to offset net capital gains. §§
1211, 1212, and 1221(10).
✔✔nexus - ✔✔The degree of activity that must be present before a taxing jurisdiction
has the right to impose a tax on an out-of-state entity. The rules for income tax nexus
are not the same as for sales tax nexus.
✔✔no-additional-cost service - ✔✔Services the employer may provide the employee at
no additional cost to the employer. Generally, the benefit is the ability to utilize the
employer's excess capacity (e.g., vacant seats on an airliner). Such amounts are
excludible from the recipient's gross income. § 132(b).
✔✔nonaccountable plan - ✔✔An expense reimbursement plan that does not have an
accountability feature. The result is that employee expenses are not deductible.
✔✔nonacquiescence - ✔✔Disagreement by the IRS on the result reached in certain
judicial decisions. Nonacq. or NA.
, ✔✔nontaxable exchange - ✔✔A transaction in which realized gains or losses are not
recognized. The recognition of gain or loss is postponed (deferred) until the property
received in the nontaxable exchange is subsequently disposed of in a taxable
transaction. Examples are § 1031 like-kind exchanges and § 1033 involuntary
conversions.
✔✔Notices - ✔✔A Notice is issued by the National Office of the IRS as official guidance
when such information is needed before the time it takes to issue a Final Regulation.
Such guidance is typically transitional until final guidance is issued. A Notice is
published in an Internal Revenue Bulletin (I.R.B.).
✔✔occupational taxes - ✔✔A tax imposed on various trades or businesses. A license
fee that enables a taxpayer to engage in a particular occupation.
✔✔office in the home expenses - ✔✔Employment and business-related expenses
attributable to the use of a residence (e.g., den or office) are allowed only if the portion
of the residence is exclusively used on a regular basis as a principal place of business
of the taxpayer or as a place of business that is used by patients, clients, or customers.
In computing the office in the home expenses, a taxpayer can use either the regular
method or simplified method. As a general rule, the regular method requires more effort
and recordkeeping but results in a larger deduction. Office in home expenses incurred
by an employee are not deductible for tax years after 2017 (and through 2025). § 280A.
✔✔Options - ✔✔The sale or exchange of an option to buy or sell property results in
capital gain or loss if the property is a capital asset. Generally, the closing of an option
transaction results in short-term capital gain or loss to the writer of the call and the
purchaser of the call option. § 1234.
✔✔ordinary and necessary - ✔✔Two tests for the deductibility of expenses incurred or
paid in connection with a trade or business; for the production or collection of income;
for the management, conservation, or maintenance of property held for the production
of income; or in connection with the determination, collection, or refund of any tax. An
expense is ordinary if it is common and accepted in the general industry or type of
activity in which the taxpayer is engaged. An expense is necessary if it is appropriate
and helpful in furthering the taxpayer's business or income-producing activity. §§ 162(a)
and 212.
✔✔Ordinary income property - ✔✔Property contributed to a charitable organization that,
if sold rather than contributed, would have resulted in other than long-term capital gain
to the donor (i.e., ordinary income property and short-term capital gain property).
Examples are inventory and capital assets held for less than the long-term holding
period. A contribution of ordinary income property must generally be valued at its fair
market value less the gain, if any, that would have been realized if sold. § 170(e).
