1. The marginal tax rate is computed by dividing total tax liability 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 of tax 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 the entity level and at the individual level as a result of the flow-through to the individuals income tax return.

True

False

7. The IRS uses the Discriminant Function System (DIF) system to give all tax returns a "score" which in turn helps auditors determine which returns to audit.

True

False

8. The statue of limitations prevents the IRS from modifying a filed tax return after

A. three years from the later of the due date of the tax return or 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 or the date the tax return was actually filed.

D. three years after the end of the calendar year for which the tax return applies.

9. Objectives of the federal tax law include all of the following except

A. those that stimulate investment.

B. those that promote savings to supplement social security programs.

C. those that discourage activities contrary to public policy.

D. those that discourage venture capital for small business.

10. As a paid tax preparer, you are automatically authorized to represent your client before the IRS.

True

False