WGU C239 ACTUAL EXAM OBJECTIVE ASSESMENT AND PA

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WGU C239 ACTUAL EXAM OBJECTIVE ASSESMENT AND PA

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WGU C239 OA EXAM

What is the default tax classification of an unincorporated entity with only one owner under the "check-the-box" regulations?

• Partnership
• Disregarded entity
• C corporation
• S corporation
• Disregarded entity

How is a shareholder's stock basis determined in a Section 351 transaction?

• Fair market value of stock received
• Adjusted basis of the property transferred, plus any gain recognized, minus boot received
• Total liabilities assumed by the corporation
• Total fair market value of all property transferred
• Adjusted basis of the property transferred, plus any gain recognized, minus boot received

What is the consequence of transferring services and nominal property in a Section 351 transaction?

• The transaction automatically qualifies for nonrecognition treatment
• The transferor recognizes ordinary income on the value of services provided 1 / 4

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• Section 351 treatment is lost for all transferors
• The transferor recognizes gain on the nominal property transferred
• The value of stock received for services is treated as ordinary income,

while the nominal property may not satisfy Section 351 requirements if its value is minimal relative to services and needs to be at least 10% of the value of services to qualify.How is "control" defined for Section 351 purposes?

• Ownership of 100% of the corporation's stock
• Ownership of 50% or more of the voting stock
• Ownership of at least 80% of the voting stock and all other stock classes
• Ownership of at least 90% of the corporation's equity
• Ownership of at least 80% of the voting stock and all other stock classes

*Treated as a sale or exchange and gain or loss is recognized if the control requirement isn't met What is the tax treatment for liabilities exceeding the adjusted basis of property transferred in a Section 351 transaction under Section 357(c)?

• The liabilities are ignored.
• The transferor recognizes gain equal to the excess liability.
• The liabilities are treated as a contribution to capital.
• The liabilities reduce the shareholder's basis in the stock received.
• Section 357(c) requires that gain be recognized if liabilities transferred exceed the adjusted

basis of the contributed property, ensuring no negative basis results. 2 / 4

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3 What is the primary reason Congress allows nonrecognition treatment under Section 351?

• To encourage property transfers without immediate taxation
• To ensure all gains are taxed at a later date
• To limit the creation of taxable losses
• To provide incentives for existing corporations to restructure
• Congress allows nonrecognition treatment to facilitate business

formations and property transfers without immediate tax consequences, aligning with economic realities.Which type of income is taxed at preferential rates under current tax law to mitigate the effects of double taxation?

• Ordinary income
• Qualified dividend income
• Short-term capital gains
• Partnership income
• .Qualified dividend income is taxed at preferential rates of 0%, 15%, or 20% to reduce the

burden of double taxation on shareholders Which of the following is not considered "property" under Section 351 for a nonrecognition transaction?

• Patents
• Services
• Equipment
• Installment notes 3 / 4

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• Services are excluded from the definition of property under Section 351. Stock received in

exchange for services is taxable as ordinary income.

*Patents, equipment, cash, and installment notes are all considered property for purposes of Section 351.What happens if a shareholder receives "boot" in a Section 351 transaction?

• All gain is recognized, regardless of the amount of boot
• Gain is recognized to the extent of the boot received or the realized gain, whichever is

lesser

• No gain or loss is recognized, even with the receipt of boot
• Losses are recognized in proportion to the boot
• Gain is recognized to the extent of the boot received or the realized gain, whichever is lesser

How does the tax treatment of C corporation losses differ from other entities?

• Losses are passed through to shareholders.
• Losses can offset shareholders' personal income.
• Losses are carried forward or back by the corporation.
• Losses are deductible only in the year incurred.
• C corporation losses are retained at the entity level and can be carried forward or back to

offset taxable income in other years.What is the purpose of the dividends-received deduction for corporations?

• To encourage corporations to distribute more dividends
• To reduce the corporate income tax rate
• To mitigate multiple taxation of corporate income
• To prevent double taxation of S corporation income
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