Are there any side effects of returning from inside a using() statement?

No, I think it’s clearer this way. Don’t worry, Dispose will still be called “on the way out” – and only after the return value is fully evaluated. If an exception is thrown at any point (including evaluating the return value) Dispose will still be called too.

While you certainly could take the longer route, it’s two extra lines that just add cruft and extra context to keep track of (mentally). In fact, you don’t really need the extra local variable – although it can be handy in terms of debugging. You could just have:

public static Transaction GetMostRecentTransaction(int singleId)
{
    using (var db = new DataClasses1DataContext())
    {
        return (from t in db.Transactions
                orderby t.WhenCreated descending
                where t.Id == singleId
                select t).SingleOrDefault();
    }
}

Indeed, I might even be tempted to use dot notation, and put the Where condition within the SingleOrDefault:

public static Transaction GetMostRecentTransaction(int singleId)
{
    using (var db = new DataClasses1DataContext())
    {
        return db.Transactions.OrderByDescending(t => t.WhenCreated)
                              .SingleOrDefault(t => t.Id == singleId);
    }
}