WGU C239 PA Exam |Complete
Answers and Solution
An individual has taxable income of $60,000. The first $20,000 is taxed at 20%, the next
$20,000 is taxed at 20%, and all income above $40,000 is taxed at 20%.Which tax
structure is being applied to the individual's taxable income?
Base
Regressive
Progressive
Proportional - ✔✔Proportional
Which federal income tax structure imposes an increasing marginal tax rate as the tax
base increases?
Regressive tax
Incremental tax
Progressive tax
Proportional tax - ✔✔Progressive
What would a graph look like for Progressive, Proportional, Incremental, and
Regressive tax structures? - ✔✔Progressive- ascending
Proportional- flat line
Incremental- stair-steps
Regressive- descending
What describes a gift tax?
Tax on the retail sale of particular products
Tax on the fair market value of wealth transfers
Tax on the retail price of goods and services
Tax on income earned by an individual - ✔✔Tax on the fair market value of wealth
transfers
What is a key element of an economy tax structure?
Attracts and stimulates investment
Helps ensure equality and ability to pay
Assists in reducing unemployment and inflation
Requires minimal compliance and administration costs - ✔✔Requires minimal
compliance and administration costs
Which objective of the federal tax law requires that a good tax system minimizes the
compliance and administration costs?
Equity
,Convenience
Certainty
Economy - ✔✔Economy
Consider how the tax burden should be distributed across taxpayers - ✔✔Questions of
Equity
Means taxpayers should be able to determine when, where, and how much to pay -
✔✔Certainty
A tax system should minimize compliance and administration costs - ✔✔Convenience
Which partnership item would flow through to an individual's tax return?
Capital gains
Gross income
Partnership exemptions
Dividends received deduction - ✔✔Capital Gains
An Eleventh Circuit client who files in the U.S. Court of Federal Claims wants to know
whether to include the terms of multiple options to renew a sale-leaseback to calculate a
deduction.
What is the authoritative reference?
A Second Circuit case which used disjunctive analysis
A tax court decision which used economic substance
An Eleventh Circuit Case which analyzed sale-leaseback transactions that generate tax
deductions
A U.S. Court of Federal Claims case which analyzed sale-leaseback transactions for
operating equipment - ✔✔A U.S. Court of Federal Claims case which analyzed sale-
leaseback transactions for operating equipment
Which tax rate calculation is an appropriate step in tax planning strategy to reduce tax?
The average tax rate, because it represents the percent of tax on each dollar
The tax-exempt tax rate, because effective tax planning utilizes tax exempt bonds
The effective tax rate, because economic income is less broad than taxable income
The marginal tax rate, because it represents the tax applicable to the next taxable dollar
- ✔✔The marginal tax rate, because it represents the tax applicable to the next taxable
dollar
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
Answers and Solution
An individual has taxable income of $60,000. The first $20,000 is taxed at 20%, the next
$20,000 is taxed at 20%, and all income above $40,000 is taxed at 20%.Which tax
structure is being applied to the individual's taxable income?
Base
Regressive
Progressive
Proportional - ✔✔Proportional
Which federal income tax structure imposes an increasing marginal tax rate as the tax
base increases?
Regressive tax
Incremental tax
Progressive tax
Proportional tax - ✔✔Progressive
What would a graph look like for Progressive, Proportional, Incremental, and
Regressive tax structures? - ✔✔Progressive- ascending
Proportional- flat line
Incremental- stair-steps
Regressive- descending
What describes a gift tax?
Tax on the retail sale of particular products
Tax on the fair market value of wealth transfers
Tax on the retail price of goods and services
Tax on income earned by an individual - ✔✔Tax on the fair market value of wealth
transfers
What is a key element of an economy tax structure?
Attracts and stimulates investment
Helps ensure equality and ability to pay
Assists in reducing unemployment and inflation
Requires minimal compliance and administration costs - ✔✔Requires minimal
compliance and administration costs
Which objective of the federal tax law requires that a good tax system minimizes the
compliance and administration costs?
Equity
,Convenience
Certainty
Economy - ✔✔Economy
Consider how the tax burden should be distributed across taxpayers - ✔✔Questions of
Equity
Means taxpayers should be able to determine when, where, and how much to pay -
✔✔Certainty
A tax system should minimize compliance and administration costs - ✔✔Convenience
Which partnership item would flow through to an individual's tax return?
Capital gains
Gross income
Partnership exemptions
Dividends received deduction - ✔✔Capital Gains
An Eleventh Circuit client who files in the U.S. Court of Federal Claims wants to know
whether to include the terms of multiple options to renew a sale-leaseback to calculate a
deduction.
What is the authoritative reference?
A Second Circuit case which used disjunctive analysis
A tax court decision which used economic substance
An Eleventh Circuit Case which analyzed sale-leaseback transactions that generate tax
deductions
A U.S. Court of Federal Claims case which analyzed sale-leaseback transactions for
operating equipment - ✔✔A U.S. Court of Federal Claims case which analyzed sale-
leaseback transactions for operating equipment
Which tax rate calculation is an appropriate step in tax planning strategy to reduce tax?
The average tax rate, because it represents the percent of tax on each dollar
The tax-exempt tax rate, because effective tax planning utilizes tax exempt bonds
The effective tax rate, because economic income is less broad than taxable income
The marginal tax rate, because it represents the tax applicable to the next taxable dollar
- ✔✔The marginal tax rate, because it represents the tax applicable to the next taxable
dollar
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
