WGU C237 - TAXATION 1 VERIFIED STUDY GUIDE
30 - Answers - 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 - Answers - 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 - Answers - 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 - Answers - Depreciable or real property used in a taxpayers trade or
business owned for more than one year. (Ch 11-8)
1231 Look Back Rule - Answers - A tax rule requiring taxpayers to treat current year net
(Ch 11-18)
1245 Property - Answers - Tangible personal property and intangible property subject to
cost recovery deductions. (Ch 11-10)
1250 Property - Answers - Real property subject to cost recovery deductions. (Ch 11-
14)
291 Depreciation Recapture - Answers - 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 - Answers - A change to taxable income associated with a change in
accounting methods. (Ch 9-30)
Abandoned Spouse - Answers - 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 - Answers - 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)
Accountable Plan - Answers - 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 - Answers - 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 - Answers - A fixed period of time win which a business reports
income and deductions. (Ch 9-13)
Accrual Method - Answers - 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 - Answers - A tax assessed on corporations that retain
earning without a business reason to do so. (Ch 15-3)
Acquiescence - Answers - 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)
Action on Decision - Answers - An IRS pronouncement that explains the background
reasoning behind an IRS acquiescence or nonacquiescence . (Ch 2-17)
Ad Valorem - Answers - A type of tax based on the value of property. (Ch 1-15)
Additional Medicare Tax - Answers - 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 - Answers - 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 - Answers - 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 - Answers - A taxpayer's before-tax rate of return on an
investment minus the taxes paid on the income from the investment. (Ch 3-3)
Alimony - Answers - A support payment of cash made to a former spouse. (Ch 5-14)
All Events Test - Answers - Requires that income or expenses are recognized when all
events have occurred that determine or fix the right to receive the income or liability to
make the payments and the amount of the income or expense can be determined with
reasonable accuracy. (Ch 9-21)
All Inclusive Income - Answers - A concept that says: Gross income means all income
from whatever source derived. (Ch 4-2)
, Allowance Method - Answers - Method used for financial reporting purposes; under this
method, bad debt expense is based on an estimate of the amount of the bad debts in
AR at YE. (Ch 9-25)
Alternative Minimum Tax - Answers - A tax that is designed to require taxpayers to pay
some specific level of tax even when they have low or no regular taxable income as a
result of certain tax breaks in the tax code. (Ch 4-11)
Alternative Minimum Tax Adjustments - Answers - Adjustments, either positive or
negative, to regular taxable income to arrive at the alternative minimum tax base. (Ch 8-
9)
Alternative Minimum Tax System - Answers - A system that was designed to ensure
that taxpayers generating economic income pay some minimum amount of income tax
each year. (Ch 8-8)
Alternative Minimum Tax Base - Answers - Alternative minimum taxable income minus
the alternative minimum tax exemption. (Ch 8-8)
Amortization - Answers - The method of recovering the cost of intangible assets over a
specific time period. (Ch 10-1)
Amount Realized - Answers - The value of everything received by the seller in a
transaction less selling costs. (Ch 11-2)
Analyze Tax Authorities - Answers - Step 4 of tax research. (Ch 2-18)
Annuity - Answers - A stream of equal payments over time. (Ch 5-11)
Annotated - Answers - A type of tax service arranged by code section where many
types of relevant supporting documents may be found. (Ch 2-18)
Arms Length - Answers - A type of transaction among unrelated taxpayers in which
each transacting party negotiates for his or her own benefit. (Ch 3-12)
Arms Length Amount - Answers - Price in transactions among unrelated taxpayers,
where each transacting party negotiates for his or her own benefit. (Ch 9-4)
Assignment of Income Doctrine - Answers - A judicial doctrine in which earned income
is taxed to the taxpayer providing the service, and that income from property is taxed to
the individual who owns the property when the income accrues. (Ch 3-12, 5-8)
Average Tax Rate - Answers - The tax rate that applies to the taxpayer's average level
of taxation on each dollar of taxable income. (Ch 1-7)
30 - Answers - 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 - Answers - 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 - Answers - 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 - Answers - Depreciable or real property used in a taxpayers trade or
business owned for more than one year. (Ch 11-8)
1231 Look Back Rule - Answers - A tax rule requiring taxpayers to treat current year net
(Ch 11-18)
1245 Property - Answers - Tangible personal property and intangible property subject to
cost recovery deductions. (Ch 11-10)
1250 Property - Answers - Real property subject to cost recovery deductions. (Ch 11-
14)
291 Depreciation Recapture - Answers - 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 - Answers - A change to taxable income associated with a change in
accounting methods. (Ch 9-30)
Abandoned Spouse - Answers - 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 - Answers - 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)
Accountable Plan - Answers - 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 - Answers - 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 - Answers - A fixed period of time win which a business reports
income and deductions. (Ch 9-13)
Accrual Method - Answers - 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 - Answers - A tax assessed on corporations that retain
earning without a business reason to do so. (Ch 15-3)
Acquiescence - Answers - 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)
Action on Decision - Answers - An IRS pronouncement that explains the background
reasoning behind an IRS acquiescence or nonacquiescence . (Ch 2-17)
Ad Valorem - Answers - A type of tax based on the value of property. (Ch 1-15)
Additional Medicare Tax - Answers - 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 - Answers - 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 - Answers - 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 - Answers - A taxpayer's before-tax rate of return on an
investment minus the taxes paid on the income from the investment. (Ch 3-3)
Alimony - Answers - A support payment of cash made to a former spouse. (Ch 5-14)
All Events Test - Answers - Requires that income or expenses are recognized when all
events have occurred that determine or fix the right to receive the income or liability to
make the payments and the amount of the income or expense can be determined with
reasonable accuracy. (Ch 9-21)
All Inclusive Income - Answers - A concept that says: Gross income means all income
from whatever source derived. (Ch 4-2)
, Allowance Method - Answers - Method used for financial reporting purposes; under this
method, bad debt expense is based on an estimate of the amount of the bad debts in
AR at YE. (Ch 9-25)
Alternative Minimum Tax - Answers - A tax that is designed to require taxpayers to pay
some specific level of tax even when they have low or no regular taxable income as a
result of certain tax breaks in the tax code. (Ch 4-11)
Alternative Minimum Tax Adjustments - Answers - Adjustments, either positive or
negative, to regular taxable income to arrive at the alternative minimum tax base. (Ch 8-
9)
Alternative Minimum Tax System - Answers - A system that was designed to ensure
that taxpayers generating economic income pay some minimum amount of income tax
each year. (Ch 8-8)
Alternative Minimum Tax Base - Answers - Alternative minimum taxable income minus
the alternative minimum tax exemption. (Ch 8-8)
Amortization - Answers - The method of recovering the cost of intangible assets over a
specific time period. (Ch 10-1)
Amount Realized - Answers - The value of everything received by the seller in a
transaction less selling costs. (Ch 11-2)
Analyze Tax Authorities - Answers - Step 4 of tax research. (Ch 2-18)
Annuity - Answers - A stream of equal payments over time. (Ch 5-11)
Annotated - Answers - A type of tax service arranged by code section where many
types of relevant supporting documents may be found. (Ch 2-18)
Arms Length - Answers - A type of transaction among unrelated taxpayers in which
each transacting party negotiates for his or her own benefit. (Ch 3-12)
Arms Length Amount - Answers - Price in transactions among unrelated taxpayers,
where each transacting party negotiates for his or her own benefit. (Ch 9-4)
Assignment of Income Doctrine - Answers - A judicial doctrine in which earned income
is taxed to the taxpayer providing the service, and that income from property is taxed to
the individual who owns the property when the income accrues. (Ch 3-12, 5-8)
Average Tax Rate - Answers - The tax rate that applies to the taxpayer's average level
of taxation on each dollar of taxable income. (Ch 1-7)
