1. The marginal tax rate is computed by dividing total taxliability by taxable income.
True
False
2. A trust is considered a __________ entity.
A. exempt
B. taxpaying
C. hybrid
D. flow-through entity
3. The following taxes are regressive except
A. FICA and self-employment taxes.
B. federal income tax for individuals.
C. All of these.
D. unemployment taxes.
4. A progressive income tax is one where
A. All taxpayers pay the same rate of tax.
B. tax rates increase when the tax base increases.
C. the rate of tax decreases as the tax base increases.
D. None of these.
5. Which of the following is the most authoritative source oftax law?
A. Income Tax Regulations.
B. Internal Revenue Code.
C. Letter Rulings.
D. Revenue Procedures.
6. Flow-through entities are unique in that they pay tax at theentity level and at the individual level as a result of theflow-through to the individual’s income tax return.
True
False
7. The IRS uses the Discriminant Function System (DIF) system togive all tax returns a “score” which in turn helps auditorsdetermine which returns to audit.
True
False
8. The statue of limitations prevents the IRS from modifying afiled tax return after
A. three years from the later of the due date of the tax returnor the date the tax return was actually filed.
B. three years from the date the tax return is signed.
C. six years from the later of the due date of the tax return orthe date the tax return was actually filed.
D. three years after the end of the calendar year for which thetax return applies.
9. Objectives of the federal tax law include all of thefollowing except
A. those that stimulate investment.
B. those that promote savings to supplement social securityprograms.
C. those that discourage activities contrary to publicpolicy.
D. those that discourage venture capital for small business.
10. As a paid tax preparer, you are automatically authorized torepresent your client before the IRS.
True
False
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