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Federal Tax Research, Tenth Edition Page 6-1
CHAPTER 6
Thomson Reuters Checkpoint
DISCUSSION QUESTIONS
6-1. The function of commercial tax services is to facilitate efficient, effective, and comprehensive searches by
organizing primary and secondary tax law sources. They also provide editorial content not available
elsewhere.
Page 192
6-2. While practitioners can retrieve most primary tax sources at no cost, this free access does not translate into
more effective research. This is because there is a voluminous amount of information and this takes time to
sort, read, and comprehend, which can lead to information overload and inefficiency. All this information
must be managed; otherwise, using the Internet for tax research is not effective. Consequently, Internet
access to primary sources cannot substitute for a subscription to comprehensive tax services.
Page 192
6-3. The four primary ways to search in Checkpoint are: (1) keyword, (2) contents, (3) index and (4) citation. A
keyword search is similar to using a search engine on the Internet such as Bing or Google. One additional
step that distinguishes a Checkpoint search from a typical search is the selection of the databases from
which to search. Simply enter the key words and search the selected databases. A contents search is
similar to flipping through the table of contents in a printed book. Each of the databases in Checkpoint
(both primary and editorial) contains a table of contents that can be browsed through to identify the
“chapter” that contains the relevant information. An index search is similar to a contents search except
instead of the table of contents, the alphabetically organized index of the database can be browsed for the
topics of import. A citation search is used when the source document of importance is already known and
the researcher simply wants to go directly to that document.
Page 194
6-4. Annotated databases are organized by the numerical structure of Code. As a result, an annotated service
usually keys off a Code section. The contents of that that portion of an annotated database conveniently
contain the related regulations, explanations and annotations (which are cases and rulings that affect that
section). A topical service divides the tax law into its functional components and organizes these
components by topic.
Page 195
6-5. Student responses may vary as the left sidebar is used like an additional tab in the search process in
Checkpoint. The left sidebar provides the following: Practice Areas (p. 192), the results list, Document
List, Contents to reveal the Breadcrumb (p. 205), and has quick access to both index and citation search
from the search screen (p. 196 and p. 210). When one of the related information buttons is used, the list of
related documents appears in the left sidebar (p. 206). The Links to related information are also located in
the sidebar (p. 207). The relevant court cases to enter into the RIA Citator are presented in the left sidebar
(p. 215).
Page 192, 196, 205, 206, 207, 210, and 215
6-6. Checkpoint subscriptions may vary and the practice areas may also vary. The table below presents some of
the more common practice areas and a description
Federal Tax A number of databases covering issues related to

Page 7-2 SOLUTIONS MANUAL
federal taxation, including explanations, tools and

practice aids to assist the tax professional. It also
includes primary source material.
State & Local State tax primary and editorial information
organized by state.
Pension and Benefits Legislative and regulatory information, both
primary and editorial, related to pension and
benefits compliance areas such as ERISA, COBRA,
PBGC and other pension related issues.
Estate Planning Coverage of topics of interest to estate and financial
planning professionals.
International A variety of legal, editorial and news sources related
to international trade, tariffs, and regulations.
Accounting and Audit Various products and services covering issues
related to accounting and auditing.
Page 196
6-7. Legislative: Internal Revenue Code, various other statutes that affect tax, Public Laws that affect taxes,
archived Code, the US Constitution.
Administrative: Regulations (final proposed and temporary); Circular 230; Administrative rulings such as
Revenue Rulings and Revenue Procedures; IRS Notices, Announcements and Releases; Letter Rulings and
Memoranda.
Judicial: Trial level (Tax, District) court decisions, Appellate-level decision and Supreme Court decisions
that are tax related.
Page 197-199
6-8. Primary source materials form the backbone of tax law. Primary materials are the typically the source of
“substantial authority” relied upon by researchers. Editorial materials are those that are prepared by subject
area experts for the commercial tax service. Editorial materials are written to be more understandable and
often provide links to the primary materials when available. Often researchers will use editorial materials
to better understand the primary sources.
Page 196, 199
6-9. The three editorial services provided by Checkpoint are: Federal Tax Coordinator (FTC), United State Tax
Reporter (USTR), and the Federal Tax Handbook. The FTC is the most comprehensive editorial source
provided by Checkpoint. It is organized by topic and contains a thorough explanation of each topical area
and links to primary sources. The USTR is organized by Code section and within each Code section the
regulations, explanations, committee reports and annotations (court cases dealing with the Code section)
can be found adjacent to the section itself. For tax concepts that cover multiple Code sections, the USTR
would need to be examined in each Code section for a comprehensive review. The Federal Tax Handbook
is a topically organized editorial source that provides brief explanations of most significant area of tax law.
Because it is less comprehensive, it can be much quicker to use.
Page 199-201
6-10. Performing a keyword search for all the Checkpoint databases at once is likely to produce results that
contain too many irrelevant sources rending the search useless. A more directed search increases the
probability that the researcher will find the relevant tax law more quickly.
Pages 202-203
6-11. The footnotes found in the Checkpoint editorial materials provide a trail that the researcher can follow from
editorial materials back to the primary sources. Recall that this is critical since “substantial authority” to
support a tax position generally requires primary source authority.
Page 212
6-12. The Related Information buttons allow the researcher to quickly find related sources of tax law to the
document that currently find themselves in. By using the Related Information buttons, the researcher has
immediate access to explanations, primary sources, regulations and many other documents that can help the
researcher understand the current document.
Pages 206, 208
6-13. A Terms & Connectors search lets you search for documents by specifying words and phrases that describe
your research question, along with specialized search connectors to filter and customize the search to get
more specific results. The Natural Language search method uses regular written language phrases to
generate search results.
Page 203
6-14. The Boolean connectors are:

&, AND – Finds results that contain both terms.
OR, | – Finds results that contain either term
NOT, ^ – Finds results that contain the first term but not the second term
The proximity connectors are:
/n – Finds results where the second terms is within n words of the first term
pre/# – Finds results where the second term is within # words of the first term
/s – Finds results where the terms are within 20 words of each other (any order)
pre/s – Finds results where the terms are within 20 words of each other (exact order)
/p – Finds results where the terms are within 50 words of each other (any order)
Pre/p – Finds results where the terms are within 50 words of each other (exact order)
atleast#() - Finds results where the terms appears at least # times
Wildcard characters
* - any character or number of characters can follow the string
? – any character can appear at that position in the string
- compound words that may or may not have the hyphen (e.g., e-mail, email, e mail)
# - disables automatic use of plural
Page 209
6-15. An index search benefits from the creation of the index which requires the tax meaning and context of the
words to be considered. For example, a keyword search finds every location that word is presented;
however an index will contextualize the word and provide subheadings under the key word to reduce the
number of irrelevant sources examined. In this way, the expertise of the individual that built the index is
utilized.
Page 210
6-16. A keyword search can be performed inside of an index search. This allows the researcher to advance
forward through the index by jumping from keyword to keyword using the Navigate by Keyword feature.
Page 212
6-17. A search for dependent results in any document with dependent or dependents. A search for “dependent”
provides the exact same result (since dependent is a single search term and not a phrase, adding quotes
results in no changes in the result). Using the wildcard version depend* expands the search to include
terms such as dependant, dependency and depending. Synonyms include child, juvenile, minor and ward.
Page 213
6-18. A contents search generally requires some experience or knowledge of the structure or organization of the
source of tax law to be searched. For example, the structure of the Federal Tax Coordinator is topical by broad
areas such as “income” and then varies across different types of entities (e.g., individual v. corporation). Some
pre-existing knowledge of the way the database is structured will prevent the researcher from having to drill down
into unrelated documents over and over again until the relevant source is found. In a similar way, a working
knowledge of the Code will assist the researcher in finding relevant tax materials using a contents search in an
annotated service such as the United States Tax Reporter.
Pages 213
6-19. A citation search is a quick way to find a specific tax law or ruling based on the citation of that law or
ruling. If for example, you are searching for a specific Code section, citation search may be the fastest way
to find that Code section – in Checkpoint, simply click Search by Citation and enter the citation. A citator,
on the other hand, allows the researcher to examine other cases or rulings that have been issued
subsequently to the document of interest that cite that document. This is used to help verify that the current
document is the most recent or prevailing law. Checkpoint uses RIA’s citator which can be accessed by
either using the Citator link from the document of interest or by finding the specific case or ruling citation
for which the analysis is required in the table of contents.
Page 205, 219
6-20. The precedential value of cases is its legal authority that considered when judges are writing opinions in
subsequent cases having similar facts or legal issues. The law attempts to maintain continuity in treatment
of similar issues so individuals can anticipate the application of the law to their own situations.
Page 218
6-21. The tax law changes daily due to new legislation, issuance of Regulations, administrative pronouncements,
and court cases. Since the tax law is constantly evolving, researchers must determine if subsequent events
have affected the legal standing of the sources upon which the tax solution relies. Checkpoint has the RIA
Citator to assist the researcher to examine any updates or changes to an area of tax law over a window of
time.
Page 219-220
6-22. A citator is a research tool that allows the tax researcher to both determine the history of a case and
evaluate the strength of its holdings. A citator may also facilitate locating cases more on point with the
client’s facts.
Pages 219-220
6-23. A cited case is the case that is being analyzed for its history or precedential value. It can also be referred to
as the main case. Citing cases are those cases which have made reference to the cited case. When one case
refers to another case, it cites the latter case. The name of the cited case and where it can be found is
referred to as a citation.
Page 219
6-24. A citator does not provide all types of information about a case or a ruling. Citators do not guide the
researcher to documents related to the case or ruling that do not specifically cite it nor do they indicate
when a case or ruling is no longer effective because of changes in the Code, unless the Code itself
specifically identifies the document or a subsequent document makes specific reference to the case being
superseded by the Code.
Page 219
6-25. An article found that is on-point with the tax issues allows the practitioner to use the author of the article as
a research associate, by capitalizing on the author’s expert judgments and references on the relevant topic
thereby saving hours of research time. The article’s references can lead the practitioner to the pertinent
primary tax sources. Researchers who ignore the tax periodicals might be accused, at best, of reinventing
the wheel and, at worst, of professional malpractice.
Page 225
6-26. Generally only primary sources of tax law, such as the Code, Regulations, or Revenue Rulings, are cited as
authority in professional tax research. Tax journals and newsletters are considered secondary sources of the
tax law. Traditionally, citing articles in professional tax research is limited to two situations: (1) If the
researcher is referring to the author's analysis and conclusions as stated in an article, (2) if the researcher
cannot find any controlling primary sources of law and a secondary source addresses the issue.
Pages 225
EXERCISES
The answers to the exercises are valid as of December, 2013. It is likely that there will be changes in the legal
services and the tax law after this manual is published. Further, it is likely that the services available to the students
will not be identical to the services available to the authors of this manual. Consequently, the student responses may
vary from those provided.
6-27. a. The RIA Checkpoint thesaurus alternatives for like-kind are: 1031, like kind, likeclass, and
likekind.
b. Expanding the Federal Tax Coordinator reveals the following subheadings: Analysis (FTC),
Checklists, Client Letters.
c. 1954.
d. The three points for accessing Current Legislation are: 1. Search Left sidebar: Legislation
Search; 2. Primary Source Materials: Current Pending/Enacted Legislation (RIA); 3. Legislation
(Editorial Analysis and Source Material).
6-28. a. Student responses will vary date of search.

b. The first two choices that are made when using the USTR Code Section are: 1. Choose the
USTR Tax Type (Income, Estate & Gift, and Excise) and 2. Choose Current or Repealed (Current
or Repealed).
c. The templates available in the Form/Line Finder are: Tax Year, Form Number, Form/Schedule
Line Number and Schedule
d. The “i-Tables” include: AFR Tables and IRS Valuation Tables, which includes Table B –
Interest for a term certain; Table R(2) – Two –life factors(other than CRUTs); Table S – Single
life factors; Table U(2) – Two-life factors (CRUTs)..
6-29. a. The templates for Estate Planning Practice Area are: Current Code, Final & Temporary
Regulations, Preambles to Final Regulations and Proposed Regulations. The templates for Payroll
Area are: Final & Temporary Regulations, and Proposed Regulations.
b. The oldest available General Council Memorandum available is from 1962.

c. The exact date is January 8, 1962.
d. The Date Range Search only applies to Federal cases. The oldest cases available are:
AFTR – 1860; TC & BTA – 1924; and TC & BTA Memos – 1928.
e. The 2 Revenue Rulings discussing §1250 are the following: 77-21 and 72-550.
6-30. a. Estimate your income tax for the upcoming year.

b. Using the Don’t Delay Your savings Tool with the following inputs: Years to wait = 5, Starting
amount =$0, Years = 30, Rate = 6% and constributions = $200, the difference is $59,935.
c. The 15 year term saves $23,529 in interest but will cost $304 extra per month.
d. Student responses will vary depending on the tax year that the research was performed. In 2013,
the marginal rate = 25%, the average rate = 10.76%.
6-31. a. The title of §178 is: Amortization of cost of acquiring a lease.

b. The Regulations issued on § §178are as follows:
Reg §1.178-1. Depreciation or amortization of improvements on leased property and cost of acquiring a
lease
Prop Reg §1.178-1. Depreciation or amortization of improvements on leased property and cost of acquiring
a lease
Reg §1.178-2. Related lessee and lessor
Reg §1.178-3. Reasonable certainty test.
c. §168
d. The FTC paragraph that furnishes an analysis of §178(a) is: L-6504
The Explanations paragraphs linked to all of §178 are: L-6504, L-7971, L-12501, and L-17028
e. The case can be found in annotations (e.g., Related Information btton for annotations) and is Kermit Eucker
et al. (1983) 81 TC 983.
6-32. a. The Checkpoint primary databases with indexes are: The Current Code, Final & Temporary
Regulations and Proposed Regulations. The Federal Tax Coordinator, USTR and Federal tax
handbook also have indexes but they are not primary materials
b. The FTC paragraphs discussing the excise tax for racing tires are W-2605 and W-2606.
c. Rev Rul 57-218, 1957-1 CB 369.
d. §4131
e. August 5, 1997
f. According to the house report (COMREP ¶41,311.03): Amounts equal to net revenues from this
excise tax are deposited in the Vaccine Injury Compensation Trust Fund to finance compensation
awards under the Federal Vaccine Injury Compensation Program for individuals who suffer
certain injuries following administration of the taxable vaccines. This program provides a substitute
Federal, “no fault” insurance system for the State-law tort and private liability insurance systems otherwise
applicable to vaccine manufacturers. All persons immunized after September 30, 1998, with covered
vaccines must pursue compensation under this Federal program before bringing civil tort actions under
State law.
6-33. a. The FTC paragraph introducing expensing advanced mine safety equipment is ¶L-9940.
b. The FTC paragraph that defines advanced mine safety equipment is ¶L-9943.
c. The USTR paragraph that discusses this topic is ¶EXP179E4
d. The primary source is cited by both the FTR and USTR as the source is §179E
e. Not very detailed. It simply states “Taxpayers can elect to expense 50% of the cost of qualified
advanced mine safety equipment property placed in service after Dec. 20, 2006 and before 2014.”
6-34. a. The directions for line 36 on 2012 Form 1040 are found in paragraph number ¶142; Total
Adjustments
b. EXP ¶1794.02 discusses what qualified real property is for purposes of §179.
c. Committee Reports, Regulations, Explanations, Annotations and Advanced Annotations are all
presented.
d. The Supreme Court cases issued in 2012 with Scalia as the judge are:
U.S. v. Home Concrete & Supply, LLC et al. 132 S. Ct. 1836 4/25/2012.
Nat’l Fed. Of Independent Business, et al. v Sebelius 132 S. Ct. 2566 6/28/2012
6-35. a. The practice areas will vary depending on the library’s subscriptions. Possible responses are:
Federal, State & Local, Estate Planning, Pension & Benefits, International, Payroll, Accounting,
Audit & Corporate Finance, All Practice Areas.
b. The materials offered in the Archive Materials for 2011 are: Annotations, Explanations, Federal
Tax Handbook, and Internal Revenue Code History.
c. It would be useful to use the archive materials if the practitioner had a client with a return audited
for a prior year or a client that had not filed returns for a particular previous year.
d. The repealed §341 covered collapsible corporations and was repealed by §302(e)(4)(A) of P.L.
108-27, effective for tax years beginning after 12/31/2002.
6-36. a. Student responses will vary. Possible responses include: Accelerated Debt Payoff, Consolidation
Loan Investment, Credit Card Optimizer, Credit Card Pay Off, How Much Do You Owe?,
Personal Debt Consolidation, Rolldown Your Credit Card Debt!
b. From the Training and Support area on the Home tab or from the Help button at the top of the
screen.
c. a nickname for a transaction in which a partner contributes an asset which is combined and
managed with the other assets of the partnership, followed by a distribution of another asset out of
the partnership to the partner.
6-37. a. McCarthy et al v. US with parallel citations of 807 F.2d 1306 and 87-1 USTC ¶9101.
b. US Court of Appeals, 6th Circuit
c. The court examined the amortization of broadcast rights and the amortization of certain
fees incurred in acquiring a business
d. The two types of fees are the legal fees associated with the loan to purchase the Yankees
and the fees incurred to organize the partnership that owned the Yankees. The loan fees
were permitted as amortizable over the life of the loan. The partnership organization
costs are considered part of the basis of the Yankees and must be capitalized.
e. McCarthy has not been cited in the RIA Citator. It modifies its previous judicial history
– the District Court case on the same issues (56 AFTR 2d 85-5612).
f. In 2004, Sec. 886(a) of PL 108-357 amended §197(e)(6) thus opening the door for the
amortization of broadcast rights for sports franchises.
6-38. a. The citation for the case is 106 AFTR 2d 2010-7370.
b. There are four cases listed by the RIA Citator (as of 2013 – this may change if the case
continues through the system). Of these, only 1 (107 AFTR 2d 2011-402) deals with the
self-incrimination issued discussed in the 2010 case.
6-39. a. Parker v. Comm. Is 79 AFTR 2d 97-2889 or 117 F3d 785 or 97-1 USTC ¶50480.
b. Only once, in Marino 93 AFTR 2d 2004-906.
c. The RIA Citator lists only one case: Stuart M Smith Jr. TC Memo 2000-244. Strangely, there is
no link for that case.
6-40. a. The citator covers Revenue Procedures, Tax Court Memoranda, Announcements and Notices , all
of which may have 2009-47.
b. The title of Rev. Proc. 2009-47 is High-low per diem method for lodging meal and incidental
expenses
c. This Procedure superseded Notice 2008-59.
d. This Procedure was modified by Rev. Proc. 2010-39.
e. Rev. Proc. 2010-39 is not longer in effect and was superseded by Rev. Proc 2011-47. This this
Revenue Procedure relates to a changing per diem amount, it is likely to be superseded each year.
6-41. a. The citation for the Gwendolyn A. Ewing case is 118 TC 494 and it addresses §6015, innocent
spouse relief, jurisdiction of the Tax Court for equity relief.
b. The original Gwendolyn A. Ewing, case (118 TC 494) is the same case as Gwendolyn A. Ewing,
122 TC 32. Upon appeal, the Tax Court findings were reversed in Gwendolyn A. Ewing, 97 AFTR
2d 2006-1224 , 439 F3d 1009 (CA9, 2/28/2006). Lastly, the original Tax Court decision was
overruled by legislation as discussed in David Bruce Billings (127 TC 7).
c. The Gwendolyn A. Ewing case is annotated in the United States Tax Reporter at: ¶60,155.01(5),
¶60,155.04(5), and ¶60,155.04(10). To find this information, use the related information links for
Annotations from the case.
d. The Haag case favorably discusses the Ewing case at 94 AFTR 2d 2004-6667.
6-42. a. Corn Products can be cited as 47 AFTR 1789, 350 US 46, 76 S.Ct. 20, and 55-2 USTC ¶9746.
b. Using the Filter by US option, 9 Supreme Court cases have cited Corn Products.
c. The court cites Bittker, Federal Taxation of Income, Estates and Gifts
d. Excepting Alderson, virtually all the cases citing Arkansas Best follow or cite favorably the
decision. As a result, the ruling would appear to remain valid.
e. The tax law was changed first through the regulations and then through the Code itself rendering
application of Arkansas Best and Corn Products to a reduced number of situations.
6-43. a. The tax years considered in Deluxe Check Printers, Inc. (15 Cl Ct 175) are 1976, 1977, and 1978.
Upon appeal, the Federal Circuit Court of Appeals (64 AFTR 2d 89-5327; 885 F2d 848) reversed
the liability and affirmed as to the interest payment.
b. The doctrine that is the basis for part B. of the Court of Federal Claims case is the Doctrine of
Variance and is discussed at T-6802 & T-6802.1in the FTC.
c. The cases and rulings distinguish themselves from the Deluxe Check Printers Court of Federal
Claims decision are as follows: BCS Financial Corp v. U.S., 78 AFTR 2d 96-5766, 930 F Supp
1279; and Sierra Pacific Resources and Subs. v. U.S., 90 AFTR 2d 2002-7511 , 56 Fed Cl 376;
PLR 9643001 & 9702002 (Listed as PLRs in the citator but are actually TAMs).
d. The number of cases cited by the Deluxe Check Printers decision could be from 21 to 23
depending if the students count every case or leave out cases with the same name (Rockefeller,
Winthrop) and the Deluxe Check Printers. This seems like a reasonable number for a case to cite.
6-44. a. The complete citation is Rev Rul 2001-60, 2001-2 CB 587.

b. Rev Rul 2001-60 modified and amplified Rev Proc 99-49 (199-2 CB 725) and Modified and
superseded Rev Rul 55-290 (1955-1 CB 320).
c. The documents that favorably cite Rev Rul 2001-60 are: Rev Proc 2002-1 (2002-1 CB 41), Rev
Proc 2002-3 (2002-1 CB 125), Rev Proc 2002-9 (2002-1 CB 353), and 2011-14 (2011-4 IRB
330).
d. Rev Rul 2001-60 discusses capital expenditures – improvements to business or property – golf
course greens.
RESEARCH CASES
The solutions to the research cases are valid as of December 2013. It is likely that there will be changes in the Code,
Regulations, Administrative Pronouncements, and Case law after this manual is published. Further, it is likely that
the services available to the students will not be identical to those available to the authors of this manual. All
possible citations are not included; only a sample of the citations most likely to be reported by students is presented.
Consequently, the students’ responses may vary from those listed for each question.
The information provided in the parentheses at the end of each solution is a search path that could be utilized to find
the answer to the research case. This is not the only research path; it is merely one of many possible methods.
6-45. The IRS can collect from Frances the $150,000 towards Beatrice’s unpaid taxes. Since the transfer of the
home was for a token value ($1,000), the transfer was constructively fraudulent because the IRS claim for
unpaid taxes arose before the transfer and Beatrice was insolvent at the time of the transfer. (FTC ¶9105
and 9106 – Keywords: family transfer, IRS, lien, unpaid, taxes, insolvent).
Code §6901
Case Rubenstein, 134 TC No. 13 (2010)
6-46. In determining whether the 6-year period for auditing applies there must be an omission from gross income
that is greater than 25 percent. In determining gross income no deductions are made. Thus, the product
returns does not reduce the sales. Since the actual gross sales were $100,000 and they reported $80,000, the
omission was only 20 percent and the IRS cannot audit five years ago. (USTR Indexes: Omission from
gross income, gross income defined)
Code §6501(a) & (e)
Ruling CCA 201023053
6-47. Expenses for in vitro fertilization and amounts paid to carries of the fertilized eggs are not deductible as
medical expenses for males who are capable of reproducing without this procedure. If there is a medical
reason for the procedure it may be deductible. (§213 Medical and Dental Expenses, FTC Index Medical
Expenses, egg donor fees and expenses (¶K-2110. Keywords: medical expense fertility treatment).
Code §213
Cases Magdain, 105 AFTR 2d 2010-442 (Note: Some RIA links for this citation go to Morgan)
Denied certiorari by US Supreme Court 2010 and cited favorably by Longino TC Memo
2013-723
Ruling PLR 200318017
6-48 To: Files
From: Student
Date: Today’s date
Subject Deduction for Tuition and Travel for Special Boarding School
Facts:
Ozzie and Sherrie Johnson enrolled their son Jack in Lonely Bridge, a special school for troubled teens
where therapy is provided. In 2012, the Johnson’s paid tuition of $48,000. In addition, in order to attend
mandatory parent therapy sessions at the school, the Johnson’s incurred travel costs associated with airfare,
rental cars and lodging of $12,000 in 2013. Lastly, the Johnson’s were required to keep a personal account
at the school to cover expenses associated with therapy. During Jack’s tenure at Lonely Bridge, the
Johnson’s were under the impression that the program at Lonely Bridge was an accredited program for
education and drug-addiction related therapy.
Issue:
Can the Johnson’s deduct the cost of tuition, travel and the personal account as medical expenses?
Analysis:
The deduction for medical expenses is covered under §213 which permits a deduction for expenses paid for
medical care for the taxpayer, spouse or dependents. Under §213(d)(1), medical care is defined as amounts
paid for “the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting
any structure or function of the body [and] for transportation primarily for and essential to medical care.”
Under §213(d)(2), “amounts paid for lodging while away from home primarily for and essential to medical
care” if “the medical care referred to…is provided by a physician in a licensed hospital (or in a medical
care facility which is related to, or the equivalent of, a licensed hospital) shall be deductible as medical
costs,” but limited to $50 per person per night.
Reg. §1.213-1(e)(1)(ii) states that “an expenditure which is merely beneficial to the general health of an
individual, such as an expenditure for a vacation, is not an expenditure for medical care.” Furthermore, in
Reg. §1,213-1(e)(1)(v), the issue of a deduction for the costs of having an individual in an institution
because of his condition are considered by the Treasury. The regulations states that the expenses for care in
an institution which is regularly engaged in providing medical care or services are deductible; however, the
regulations also state that “where an individual is in an institution, and his conditions is such that the
availability of medical care in such institution is not a principal reason for his presence there, only the part
of the cost of care in the institution as is attributable to medical care.”
Reg. §1.213-1(e)(1)(v)(a)) further states:
While ordinary education is not medical care, the cost of medical care includes the cost of
attending a special school for a mentally or physically handicapped individual, if his condition is
such that the resources of the institution for alleviating such mental or physical handicap are a
principal reason for his presence there.
and
In such a case, the cost of attending such a special school will include the cost of meals and
lodging, if supplied, and the cost of ordinary education furnished which is incidental to the special
services furnished by the school. Thus, the cost of medical care includes the cost of attending a
special school designed to compensate for or overcome a physical handicap, in order to qualify the
individual for future normal education or for normal living, such as a school for the teaching of
braille or lip reading. Similarly, the cost of care and supervision, or of treatment and training, of a
mentally retarded or physically handicapped individual at an institution is within the meaning of
the term "medical care."
Two related Revenue Rulings have been issued on the topic of institutional care for drugs and alcohol.
Rev. Rul. 72-226 states that “amounts actually paid by the taxpayer to maintain his dependent in a
therapeutic center for drug addicts including the cost of the dependent’s meals and lodging at the center
which were furnished as a necessary incident to his treatment, are expenses for medical care.” Rev. Rul.
73-325 holds that “amounts paid by the taxpayer to the therapeutic center for alcoholism, including the cost
of the taxpayer’s meals and lodging at the center which are furnished as a necessary incident to his
treatment, are expenses for medical care.”
Rev. Rul. 63-91 states that,
amounts paid for medical services rendered by practitioners, such as chiropractors,

psychotherapists, and others rendering similar type services, constitute expenses for “medical
care”…even though the practitioners who perform the services are not required by law to be, or
are not (even though required by law) licensed, certified, or otherwise qualified to perform such
services.
The ruling also cites Wendell (12 TC 161, 1949) in stating that “the determination of what is medical care
depends on the nature of the services rendered, not on the experience, qualifications, or title of the person
rendering them.” Rev. Rul. 63-91 also states
The Code and the regulations do not require a taxpayer to ascertain whether a practitioner is
qualified, is authorized under state law, or is licensed to practice, before obtaining his services or
claiming a medical expense deduction. Where it can be shown that an individual paid an amount
for a purpose defined in the Code as “medical care,” such amount qualifies as a medical expense.
A 1992 Tax Court case, Urbauer (63 TCM 2492, 1992), the court held that the taxpayers could “deduct
amounts spent in connection with the treatment of their son for behavioral and drug problems at a college-
preparatory school that addressed the educational and emotional needs of its students. Since the son
attended the school principally to benefit from its medical program and the costs of his education were
incidental to the special services provided by the school, his enrollment costs were deductible as medical
expenses.” In addition, the court held that since his personal account was tantamount to his continued
attendance at the institution, those expenses were also deductible. However, the court also held in Urbauer
that the cost of lodging was not deductible since the travel was for care that was not provided by a
physician in a licensed hospital as required under §213(d)(2).
Conclusion:
In the Johnson’s case, the tuition for John at Lonely Bridge meets the standard to be treated as “medical
care” under §213. The definition of medical care under Reg. 1.213-1 as including John’s therapy at Lonely
Bridge is also supported by Rev. Rul. 72-226 and Rev. Rul. 73-325. Lastly, the facts in Urbauer closely
resemble the facts in the instant case, making it difficult to distinguish between the two. Under Rev. Rul.
63-91, it does not appear relevant that Lonely Bridge was not acting in good faith with respect to
qualifications or credentials. The Johnson’s travel costs are deductible under §213, however, any part of
the travel costs related to lodging are not deductible by the Johnson’s as Reg. 1.213-1 and Urbauer make it
clear that such costs are not associated with services provided by a physician in a licensed hospital. Lastly,
the court in Urbauer held that the personal account expenses are deductible due to the close association
those costs have with the rendering of medical services at the school.
6-49. For tax purposes, the term “home” has a specific meaning – the taxpayer's principal place of employment;
not the home that the taxpayers considers their personal residence. When taxpayers choose not to live some
place other than where their employment is, this is a personal choice, thus, those expenditures are not
ordinary and necessary business expenses. There is an exception when the taxpayer is away from the
personal residence for business on a temporary basis. (USTR EXP ¶1624.125 – Keywords: “away from
home” residence)
Code §162(a)(2)
Cases Many to choose from but most refer back to:

Kroll 49 TC 557
Six 71-2 USTC ¶9694, 450 F2d 66
Cerny, 62 TC Memo 1991-526
Minick TC Memo 2010-12
Ruling Rev Rul 73-529, 1973-2 CB 37
6-50. Generally, emotional distress is not a physical injury or illness for the damages exclusion under the Code
even when there are physical symptoms such as headaches high blood pressure or sleeping disorders.
However, damages are excluded when there is a physical injury or illness exacerbated a physical illness.
Fibromyalgia is a disorder meeting the definition of a physical injury. Depression; however, was found to
be too similar to the characteristics of emotional distress that is specifically excluded from physical injury.
(USTR - ¶1045.02(30) Settlements )
Code §104 (a)(2)
Regulations Reg. §1.104-1(c)
Cases Domeny, TC Memo 2010-9

Blackwood, TC Memo 2012-190
Reports H Rept No. 104-586 (PL 104-188) p. 144
6-51. Amounts diverted from political campaigns for personal use are gross income to the candidate in the year
diverted. (FTC Index Gross Income, political contributions - keywords: funds personal use political
campaign)
Code §§61, 527
Regulations Reg. §1.527-5(a)(1)
Rulings FSA 0887

Rev. Rul. 71-449
Rev. Rul. 74-22
6-52. Alimony payments are deductible by the payor and taxable to the recipient. Alimony is defined simply as
amounts paid to a spouse or former spouse under a divorce or separation agreement. Child support is not
deductible to the payor and not taxable to the recipient. If payment is less than the full amount required by
the divorce decree, the payments are first treated as child support and the remainder as alimony. Therefore,
$1,000 of each payment is considered alimony. (USTR Index Minors, Support Payments, Less than
periodic - Keywords: “child support” alimony, ¶715.16(5)
Code §71(c)(3)
Regulations Reg. §1.71-1(e)
Cases Blyth 21 TC 275 (1953) acq
6-53. To: Files
From: Student
Subject Allocation between Alimony and Child Support
Facts:
Tom and Katie were divorced in 2011. The divorce decree stipulates that Tom will pay child support (they
had a daughter Suri) of $2,000 per month and alimony of $3,000 per month. In 2013, Suri came into a
large amount of wealth through her marriage and the child support payments were no longer necessary.
There is written documentation (e-mails) between Suri and Tom to that effect; however, Katie’s assent to
the reduction in child support is oral. Tom continued to pay only the alimony as required under the decree.
Issue:
How much alimony can Tom deduct?
Analysis:
Under §71, gross income includes amounts received as alimony. In a symmetric fashion, §215 allows a
deduction for amounts paid for alimony. The term “alimony” is defined in §71(b) as a payment in cash
received by a spouse under a divorce or separation agreement. A divorce or separation instrument is
defined in §71(b)(2) as “a decree of divorce or separation maintenance or a written instrument incident to
such a decree, a written separation agreement, or a decree…requiring a spouse to make payments for the
support or maintenance of the other spouse.
Frequently, in addition to alimony, divorce decrees also call for payments made to the custodial parent to
support children. Under §71(c), a taxpayer may not treat a payment or any part of a payment for child
support as alimony. Under §71(c)(2) if the divorce or separation instrument calls for any reductions in
child support due to the occurrence of an event relating to the child (e.g., attaining a certain age, marriage,
leaving school, etc.), then the amount of that reduction for any payment prior to the contingent event
occurring, shall also be treated as child support. Lastly, with regards to child support payments, §71(c)(3)
states that “if any payment is less than the amount specified in the instrument, then so much of such
payment as does not exceed the sum payable for support shall be considered a payment for such support.”
Reg. §1.71-1(e) provides an example of the intent of §71(c)(3).
For example, if the husband is by terms of the decree, instrument, or agreement required to pay
$200 a month to his divorced wife, $100 of which is designated by the decree, instrument, or
agreement to be for the support of their minor children, and the husband pays only $150 to his
wife, $100 is nevertheless considered to be a payment by the husband for the support of his
children.
The Tax Court in Blyth (21 TC 31 (1953)) examined the ordering rules in §71(c)(3) which dictate that
anytime the combined alimony and child support payments are less than the amounts per the divorce
instrument, payments are first characterized as child support (note that Blyth deals with the IRC of 1954
and §71’s predecessor, §22). In Blyth, the divorce agreement called for $100 in alimony and $50 in child
support per month. Due to a change in circumstances, the husband reduced the child support to $0 per
month but maintained the $100 alimony. The court held that $50 of his “alimony” payment represents the
child support and that alimony was therefore reduced to only $50 per month also. In Blyth, the divorce
decree was not modified in writing and the child support adjustment appears to have been unilaterally
decided by the husband. This lack of agreement on the wife’s part is made evident by the financial
settlement between husband and wife for unpaid child support during the period in question.
In Hazam (79 TCM 1597; TC Memo 2000-71, (2000)), an ex-husband altered the terms of child support
alimony payments to his ex-wife through an oral agreement. In Hazam, the ex-wife reduced the income
from alimony she reported each year by the amount of the child support prescribed in the divorce
instrument (i.e., she made the §71(c)(3) adjustment herself) while the husband deducted the alimony in full.
The divorce instrument in Hazam stated that the child support amounts were, in fact, subject to change
based on a change in circumstances; however, the instrument also stated that the agreement was subject to
modification only if both parties agreed to such change in writing.
In Blair (56 TCM 923; TC Memo 1988-581 (1988)), the Tax Court examined another allocation of
payments between alimony and child support in which the wife orally agreed to the adjustment in child
support but again, such modification of the original decree was not made in writing. In Blair the court is
not ambiguous in its interpretation of §71 and finds that even in cases where the former spouse agrees to
the reduction in child support, without a commensurate written modification of the divorce agreement, the
oral modification will not be sustained for tax treatment.
Conclusion:
Tom and Katie modified the original terms of the divorce decree but did so only orally. The rules under
§71(c)(3) and the regulations thereunder are clear that in situations where the combined alimony and child
support payments are less than the amount stipulated by the divorce instrument, payments are first
characterized as child support. The Tax Court has repeatedly (Blyth, Hazam and Blair) held that in such
situations, irrespective of the intent of both parties to agree or disagree with the modification of the divorce
instrument, if such modification is not reduced to writing, no such modification will be recognized under
tax law. Tom’s documentation with Suri would not appear to qualify as a written modification to the
divorce agreement as it is clear that Katie (the counterparty in the original divorce agreement) was not part
of these written documents and in no way agreed to the changes in writing, in spite of seemingly agreeing
with the changes.
In addition, although the adjustment to child support occurred as a result of a contingent event relating to
the child (Suri’s marriage and accretion of vast wealth), such contingency was not part of the divorce
agreement and thus does not affect the amount of alimony under §71(c)(2). Tom’s payment of $3,000 per
month subsequent to the modification of child support must be recharacterized to the extent of $2,000 as
child support. As stated in Blair, “had [the husband] gone back to the divorce court for a modification of
the decree, the result in this case may well have been different.”
6-54 Child care costs include all expenses for household services while care is provided for qualifying
individuals. The care needn't be provided in the least expensive available way. Therefore, all items paid by
Rodriguez qualify for the credit, including the employee-FICA-share and the vacation, if the vacation is
part of the nanny’s compensation package. (FTC ¶4322 – Keywords: household services employment
related expense child care credit)
Code §§21(b);
Regulations Reg. §1.21-1(d)
Cases Perry, 92 TC 470 (1989)
Rulings Rev Rul 74-176, 1974-1 CB 68
6-55. A meal provided to an employee can be excluded from gross income in at least 3 ways: (1) as a no
additional cost service, (2) as a qualified employee discount, (3) as a de minimis fringe or (4) as a meal
provided for the convenience of the employer. The first 3 are derived from §132 and the last from §119.
Since Kenny is receiving food, unless the Burger Pitt product cost is insignificant as compared to the labor
cost (which seems unlikely), this is not a no-cost service. A qualified employee discount can be excluded
from income if (for the sale of property), the discount does not exceed the gross profit when sold to
customers. Basically, if the Burget Pitt charges Kenny less than cost, the portion of the discount below cost
is includable in income. A de minimis fringe is one that the value of which is so small as to make
accounting for it unreasonable. In this case, for example, perhaps a serving of French fries provided
occasionally to Kenny seems to fit de minimis; however since The Pitt charges Kenny for 40% of the cost,
the business can obviously track the amount of the discount and thus it is not likely to qualify as de
minimis. Under §119, meals provided to wait staff can be excluded from income if (1) the meals are
furnished on the business premises and (2) the meals are for the convenience of the employer. When the
employee is required to pay for the meal (as in Kenny’s case) and the employee may or may not purchase
the meal, the meal will not be considered for the convenience of the employer under Reg. §1.119-1(a)(3).
Unless Kenny can establish that the meals provided on his working days are for the convenience of the
Burger Pitt (e.g., there are no other nearby lunch facilities, the manager prefers the staff to limit lunch to a
fairly short period since lunch is also busy), the discount is not excludable under §119. Unless the
employee discount exemption can apply, the discount provided to Kenny on days he is not working is
almost certainly taxable. (FTC and USTR – Keywords: employee discount meal)
Code §§61, 119, 132
Regulations Reg §1.61-21(a)

Reg §1.119-1
Reg §1.132-2
Reg §1.132-3(e)
Reg §1.132-7
6-56. a & b. The executor or administrator of the decedent's estate signs and files the final income tax
return for the decedent. If no executor or administrator has been appointed, the final
return must be signed and filed by the person charged with the decedent's property. If the
decedent was married at the time of death, the surviving spouse may file the last return.
The last return in this situation can be filed as married filing jointly.
c. After the death of a taxpayer, the executor or administrator of the taxpayer's estate may
recover a refund. Form 1310 is used to claim the refund. The signature on the claim by
one of two or more co-executors is acceptable. If the last return is filed married filing
jointly with the surviving spouse, the spouse will collect the refund.
Code §§451, 6012(b)
Regulations Reg. §1.451-1(b)(1)

Reg. §1.6012-3(b)(1)
Cases Fairbanks, 128 F2d 537 (1942)

Wells Fargo Bank & Union Trust Co, 225 F2d 298 (1955)
Ruling Chief Counsel Advice 201012033; 200010046
6-57. Sick pay is taxable as salary whereas worker’s compensation is excludable from income. Therefore, Fifi
should choose the $850 in worker’s compensation as the taxes on the sick leave are likely to reduce its after
tax amount below $850. Fifi must follow the labels placed on the payments and cannot select the $1,000
and then treat $850 of it as workers compensation. ( FTC ¶H-1360 et seq. Keywords workers compensation
sickness)
Code §104
Regulations Reg. §1.104-1(b)
Cases Wham, TC Memo 1985-625

Fotis, TC Memo 1989-287
Wallace, 81 AFTR 2d 98-1470
Barlett, TC Memo 1998-15
Rulings Rev. Rul. 83-77, 1983-1 CB 37

PLR 8336005
6-58. The couple can likely claim a casualty loss for the accidental loss of the ring because the loss resulted from
an identifiable event that was sudden, unexpected, and unusual. The Keenan case, which is exactly like this
situation indicates there is no casualty. However, the case is old (1950) and it is a District Court case. The
Tax Court allowed a similar casualty in Carpenter and White. IRS has indicated that it will follow White.
Code §165(c)(3)
Cases Keenan v Bowers, 91 F Supp 771 (1950 DC SC) (not allowed)

Carpenter, TC Memo 1966-228 (allowed)
White, 48 TC 430 (1967), acq (allowed)
Kielts, TC Memo 1981-329 (allowed)
Rulings Rev. Rul. 72-592, 1972-2 CB 101 (IRS will follow White)
IRS Pub Publication # 547 (2012) p. 3
6-59. Under Donnelly, the clothes are not likely to be deductible. The second circuit court created a three part test
for the deduction of clothing as a business expense: (1) the clothing is of a type specifically required as a
condition of employment, (2) it is not adaptable to general usage as ordinary clothing and (3) it is not so
worn. That said, Louella’s clothing requirements are somewhat unique from, for example, those examined
in Pevsner (the appellate case). Louella was not just required to wear a type of clothing but also the most
current fashions “whether they have met with commercial success or not.” Thus, it is possible that
Louella’s clothing choices were not ultimately accepted into mainstream fashion and thus would not be
“adaptable to general use.” Also, Louella was restricted to a certain color (or shade thereof) and may
therefore claim that this also lessen the likelihood that these clothes are adaptable for general use.
Code §162
Regulation §1.162-1
Cases Auerbacher, TC Memo 1956-218 Donnelly, 262 F2d 411

Pevsner, 80-2 USTC ¶9732 Gerres, TC Memo 1986-573

Popov, TC Memo 1998-374 Bernardo, TC Memo 2004-199

Rev. Rul. 70-474, 1970-2 CB 34
6-60. The Service has ruled that expenses incurred for local transportation between the taxpayer’s residence and
the place where the charitable services are rendered are deductible, provided they are “directly connected
with and solely attributable to the rendition of such services.” The deductible amount for a taxpayer
performing volunteer services is determined on the basis of actual expenses, or the taxpayer may use a
standard rate per mile for automobile transportation. However, the traveling expenses between a taxpayer's
home and a place of worship, and the travel expenses related to attending religious functions, are personal,
and aren't deductible as charitable contributions. (RIA, FTC – Index: Charitable Contribution, Ctrl F:
transportation; K-3614;)
Code §170
Regulations Reg. §1.170A-1(g)
Cases Tokh, TC Memo 2001-45
6-61. Phil’s educational expenses may be deductible, assuming he is sufficiently established in his trade or
business and the education is to maintain or improve skills required by Phil in his present employment or
the education is required by his employer or profession. The miscellaneous itemized deductible costs would
include tuition, books, transportation from work directly to SU, and other out-of-pocket items, subject to
the AGI 2% floor. However, to the extent that the courses taken are not related to his present employment,
the costs associated with those courses would not be deductible as itemized miscellaneous.
Phil would qualify for the Lifetime Learning credit with respect to the tuition and fees (subject to AGI
phaseout limitations). The Lifetime Learning credit is available for any courses at an eligible higher
educational institution. The FOR AGI deduction under §222 is to expire for years beginning after
12/31/2013. Since this is a graduate program (MBA), Phil would not qualify for the Hope (AOTC) Credit.
(RIA ,USTR – Table of Contents, Determination of tax Liability, Nonrefundable personal Credits, §25A;
Computation of Taxable Income, Additional itemized deductions, §222; Deductions for Individuals;
Annotations for §162, Keywords: education maintaining skills)
Code §§25A, 162, 222(e)
Regulations Regs. §§1.162-5(a), 1.25A-2(d)
Cases Sherman, TC Memo 1977-301

Smith, Ronald T, TC Memo 1981-149
Rulings Notice 97-60, 1997-2 CB 310
6-62. Frank can obtain “innocent spouse” relief if he can establish that he had no knowledge of the under-
statement from the illegal activities and did not benefit from the activities by living beyond the income that
he believed he and Sharon made. Assuming Frank is able to meet the elements for “innocent spouse” relief,
he should be able to fend off the IRS charge and escape liability to pay tax on the $50,000. There are so
many cases on this topic that students may find applicable cases that are not listed below (RIA, FTC –
Keywords: “innocent spouse” illegal; V-8523)
Code §§6015(b)(1)
Regulations Reg §1.6015-2
Cases Krafsky, TC Memo 1991-256

Schmitz, TC Memo 1988-168
Alvarez, TC Memo 1986-581
Whitten, TC Memo 1980-245
Grosso, TC Memo 1980-186
6-63. The income from the sale of blood is taxable. Professional blood donation (donating on a regular basis) is
business; it is considered the sale of tangible product. Therefore, Maria has ordinary income from the sale
of her blood and can deduct the costs of transportation to the hospital (transporting her product) and the
vitamins and other pills she takes to produce her quality product. No depreciation of the human body is
allowed. (RIA, FTC – Keywords: blood expenses, J-1420; Keywords: Blood expenses, L- 4237)
Code §§61, 162
Cases Lary,787 F2d 1538 (1986)

Green, 74 TC 1229 (1980)
Garber, 589 F.2d 843 (1979)
Rulings PLR 8814010
6-64. Chang may take a deduction for the professional journal as it is related to his employment. The $3,000
subscription cost is currently deductible as a cash basis taxpayer unless it will cause a distortion of income.
If distortion occurs, it must pro-rated. (RIA, USTR – Table of Contents, §162, Keywords: subscription
¶1624.081, 1624.195)
Code §§162, 461
Regulations Reg. §1.162-6

PLR 8124101
IR 86-169 (12/12/1986)
6-65. This solution assumes that other Code requirements are met such as having receipts for the expenses. For
years before 2014, private and public elementary and secondary educators (K through 12) are allowed a
FOR AGI deduction for up to $250 of school supplies. Any excess would be treated as an unreimbursed
employee expense. In this case, Jamie would deduct the amount in excess of $250 as an itemized deduction
subject to the 2% limitation. Jamie would also be able to deduct the mileage allowance for the trip to the
educational store. (RIA, FTC – Keywords: “Educator Expense”; A-2611.2 and .3)
Code §§62(a)(2)(D); 62(d); 162
Rulings IR 2005-82, 8/16/2005

IR 2006-195, 12/22/2006
IR 2007-158, 9/11/2007
6-66. Ted is allowed the workers compensation exclusion on the amount he receives from the city. (RIA, FRC –
Indexes: worker’s compensation; Ctrl F: survivor benefits; H-1359)
Code §104
Regulation Reg. §1.104-1(b)


Rev. Rul. 72-291, 1972-1 CB 36
6-67. Amounts paid by Peggy for the smoking cessation program and for prescription drugs to alleviate nicotine
withdrawal are deductible as medical expenses. Scientific evidence has established that nicotine is
addictive and that smoking is detrimental to one's health. However, over-the-counter treatments such as
nicotine patches and chewing gum are not deductible because they do not require a prescription, which is
necessary to qualify for deductibility. (FTC – Table of Contents: Deductions: Taxes, Interest, Charitable,
Medical, Others, Keyword: smoking; ¶K-2117, K-2137)
Code §§213, 213(b)

Rev. Rul. 2003-58, 2003-1 CB 959
IR 1999-55, 6/11/1999
6-68. The seller cannot deduct the points in the current year as interest, as there is no debt to which the points
relate. However, buyers may claim a tax deduction for points paid in connection with the purchase of a
principal residence even if the seller of the property pays the points. Under this rule, the seller is treated as
having paid the amount of the points to the buyer who, in turn, is treated as having used that cash to pay the
points charged by the lender. The amount of the seller-paid points is subtracted from the purchase price in
computing the basis of the residence. (RIA, FTC – Table of Contents: Chapter K, Keyword: points paid
seller K-5026, K-5027 K-5179, K-5178)
Code §§163, 461(g)(2)
Ruling Rev. Proc. 94-27, 94-1 CB 613

Rev. Rul. 69-188, 69-1 CB 54
Case Williams, TC Memo 1966-143
6-69. The Bed and Breakfast activities qualify as a rental activity. Therefore, they are subject to the vacation
home and passive activity rules. (RIA, FTC – Keywords: “bed and breakfast” allowable deductions; M-
6048)
Code §§162, 280A
Rulings PLR 8732002 and 8009013,
Cases Buchholz, TC Memo 1983-378

Anderson TC Memo 2006-33
Razavi, 74 F3d 125 (1996)
6-70. The income shift will be recognized if the Carline improved Leon’s skills or her promotional activities
benefited Leon’s career. Carline must substantiate that the arrangement for payment existed prior to signing
the contract. If the funds are received by Leon and then are transferred to Carline for services rendered,
Leon receives a business deduction, which could be considered salary payment to Carline. (USTR –
¶735.01, Keywords: parent child contract)
Code §§73 and 162
Cases Hundley, 48 TC 339 (1967)

Allen, 410 F2d 398 (1969)
6-71. Divorce costs are personal in nature and are non-deductible expenses based on the origin of claim doctrine.
Divorce arises entirely out of a marital relationship. There are numerous cases and only a few are listed.
(RIA, FTC – Table of Contents: Chapter L Deductions, L-2900 Legal and Accounting Expenses, Keyword:
divorce, L-2901, L-2962)
Code §262
Regulation Reg. §1.262-1(b)(7)
Cases Gilmore, 372 US 39

Middleman, TC Memo 1970-118
Kozak, TC Memo 1971-167
Robbins, 8 BTA 523 (1927)
6-72. The commission reduces sales, as a cost of doing business. They are not a non-deductible fine or bribe,
because state laws against such payments (if they exist) are not enforced, and the payments are commonly
made in the industry. (Federal Tax Coordinator, Topical Indexes – K, drill down to kickbacks; L-2609)
Regulation Reg. §1.162-18(b)(3)
Cases Fiambolis, 57-2 USTC ¶9805

Valetti, 58-2 USTC ¶9869
Richardson, 16 TCM 518 (1957)
Brizell, 93 TC 151
Bilzerian, 81 AFTR 2d 98-2329
6-73. Clara will qualify for the lifetime learning credit to the extent of the tuition and related fees limitation for
the courses she has taken during the year. The travel costs do not qualify for the lifetime learning credit.
Clara might rather try to deduct the expenses as employee educational costs. Whether Clara can deduct the
expenses she incurred depends on whether they were undertaken to maintain or improve existing skills
required by her employment or to meets the express requirements of her employer. Since Clara has no
formal training in any of the areas in which she works, it is questionable whether she has existing skills to
maintain. It is clear that her employer is not requiring her to attend the seminars or college classes. If Clara
can prove the expenses meet the requirements, the seminar costs along with the travel may be deductible as
miscellaneous expenses. (RIA, FTC – Table of Contents: Chapter A, Credit for higher education expenses,
A 4500; Chapter L, Education expenses of individuals, L-3700; L-3704)
Code §§25A, 67, 162
Regulations Regs. §§1.25A-4, 1.67-1T, 1.162-5(a)
Rulings Notice 97-60, 1997-2 C 310
Cases: Fleischer, 22 AFTR 2d 5765 (1968)

Boser, 77 TC 1124 (1981
Rossum, TC Memo 1985-593
Raines, TC Memo 1983-125
ADVANCED CASES
6-74. The following is a list of tax issues for Helen Hanks and Tom Hunt and primary sources substantiating the
appropriate tax treatment. The issue list and primary sources should not be considered a finite solution.
Students or the professor may identify different issues when reading this case and thus provide additional
sources.
Tax Issues
Requirements for deducting moving expenses
Moving household items of Helen and Tom, storage unit contents, sailboat
Hiring someone to drive Helen’s car
Airline ticket for Helen to move
Tom’s driving to Portland
Hotel stays in San Francisco
Temporary living in Portland
Storage of household items by moving company
Children moving from Spain
Sale of Helen’s home in San Francisco
House hunting trips to Portland
Tom’s job hunting expenses
Helen’s payment of all moving costs
Helen’s reimbursement of moving expenses and temporary living costs
Timing of reimbursement
§ 217 permits a deduction of moving expenses paid or incurred in connection with a work-related move.
Deductible moving expenses includes moving of household goods and personal effects from the former
residence to the new residence and travel costs to go from old to new residence (but specifically not meals).
Any other individuals using the former and new residence as the principal home may also deduct these
costs and need not travel together (Reg. §1.217-2). These expenses must be reasonable. There is a mileage
limit that San Francisco to Portland more than exceeds.
There is only one regulation under §217 that might apply: Reg. §1.217-2. [Note that the regulations have
not been revised to reflect the non-deductibility of meals associated with moving in PL 103-66 in 1993.]
The regulations describe expenses as reasonable if they are associated with “movement or travel by the
shortest and most direct route available” by conventional mode of transportation. Thus if “arrangements
are made to provide a circuitous route for scenic, stopover, or other similar reasons, additional expenses
resulting therefrom are not deductible.”
Moreover, under Reg. §1.217-2: Expenses of moving household goods and personal effects are defined as
the expense of transporting such goods from old to new residence including packing, crating, in-transit
storage and insurance. The costs of connecting or disconnecting utilities are also deductible. Cost of
storage qualifies for deduction if within 30 consecutive days after move from old house and prior to
delivery at new house. Storage charges that are not in-transit costs are not deductible. Travel costs include
only 1 night in a hotel in the old city. These costs do NOT include expenses following the date of arrival at
the new city, whether waiting for the household goods to arrive or not. House-hunting expenses are not
deductible.
Lastly, Reg. §1.217-2(a)(2) allows a taxpayer to deduct the costs in the year of reimbursement, but never
earlier than the year paid.
Additional sources:
Rev. Rul. 65-309, 1965-2 CB 77 – moving expenses includes reasonable expenses of moving the
employee’s personal auto.
Aksomitas 50 TC 679 (cost to move yacht not deductible since not personal or household goods) and Fogg
89 TC 310 (allows deduction for frequently used sailboat. Makes distinguishing characteristic that yacht in
Aksomitas was unseaworthy and in disrepair and had not been used for 2 years) cover the costs of moving a
boat.
Paguio TC Memo 1981-2 and Bauer TC Memo 1973-111 – travel expenses denied as not established that
individuals other than taxpayer had primary abode in previous home prior to move.
Repaci TC Memo 1979-389 – only one trip per household member and no miscellaneous expenses
permitted.
Martin TC Memo 1996-503 and Speers TC Memo 1994-157 cover in-transit storage.
Purdy TC Memo 1979-193 covers the timing of the deduction for moving expenses.
Generally, moving costs must be substantiated but for exceptions where the Cohan rule was applied see
Armes TC Memo 1978-258, Bartsch TC Summary 2004-3 and Kent TC Summary 2004-23.
The costs of driving your own vehicle using a standard mileage rate were previously issued under a
Revenue Procedure but are currently issued under an IRS Notice each year. The most recent at the time of
publication was Notice 2013-80, 2013-52, IRB 821 which covers 2014 mileage rates.
Secondary sources EXP ¶2174.01 et seq from the USTR

L-3600 et seq from FTC
IRS Publication 521
6-75. The following is a list of tax issues for Mark and Leslee Jones and primary sources substantiating the
appropriate tax treatment. The issue list and primary sources should not be considered a finite solution.
Students or the professor may identify different issues when reading this case and thus provide additional
sources.
Tax Issue Primary Sources Secondary Sources

Embezzlement income §61 USTR ¶615-177(5)
Rev. Rul. 61-185 FTC J-1602
James v. US 7 AFTR 2d 1361 (366 US 213)
Gambling winnings and losses §61 (income from winnings) FTC M-6100 et seq
§165(d) (deduction of losses) USTR ¶1654.500 et
Reg. §1.165-10 seq
Dunnock TC Memo 1980-449
Libutti TC Memo 1996-108
Mayo v Comm. 136 TC 81 and related AOD 2011-006
Hall TC Memo 1982-356
Innocent Spouse §66(b) and (c) FTC A-5026 et seq
§6015(b) and (f) USTR ¶60154 et seq
Rev. Proc. 2013-34
Deihl TC Memo 2012-176
Zaban TC Memo 1997-479
Butler 114 TC 276
Material Omissions from §6501, §6662, §6663, §6664
Return
Stock gains and losses §1001, §1211, §1212
CUMULATIVE CASE
6-76. To: Files
From: Student
Subject Residency and income tax for non-resident alien student
Facts:
Anh Nguyen is a graduate student from Vietnam. She has been in the US since August 2010 and classified
as a full-time student since that time. She is in the US on a valid F-1 student visa. In 2013, Anh started
employment on campus and received $6,000 in wages as a teaching assistant. Income and employment
taxes were withheld from Anh’s wages by her employer, Southern California University. Anh has been
present in the US according to the following schedule:
Year Arrive Depart # Days

2010 8/12/2010 12/25/2010 135
2011 1/06/2011 5/12/2011 126
2011 6/10/2011 12/26/2011 199
2011 Total 325
2012 1/04/2012 12/31/2012a 362
2013 1/01/2013 12/31/2013a 365
a
– Days counted through year end since Anh did not leave US during that time
Issue:
(1) What is Anh’s residency classification for federal income tax purposes?
(2) What is Ahn’s tax liability on her 2013 wages?
(3) What is Anh’s employment tax liability on her 2013 wages?
Analysis:
Issue 1: Residency
The definition of a resident alien is provided in §7701(b) as any individual that meets one of three tests:
(1) Lawful permanent resident
(2) Substantial presence test
(3) The first year election
§7701(b)(6) states that a lawful permanent resident is an individual that “has the status of having been
lawfully accorded the privilege of residing permanently in the United State as an immigrant in accordance
with immigration laws.” This is typically known as the “green card test” as individuals issued a “green
card” by US Citizenship and Immigration Services are permitted to reside legally in the US (Reg.
§301.7701(b)-1).
§7701(b)(3) describes the substantial presence test (SPT). An individual is said to have met the SPT if (a)
the individual was present in the US for at least 31 days in the current tax year AND (2) the sum of the days
during the current and preceding two years (using the prescribed formula) equals or exceeds 183 days. The
formula works as follows:
Multiply
number of
Year days by
Current tax year 1
First preceding year 1/3
Second preceding year 1/6
However, §7701(b)(3)(D) provides that an individual will not be counted as being present for purposes of
the SPT if they are an exempt individual. §7701(b)(5) provides that a student shall be treated as an exempt
individual through the end of the fifth year of being treated as an exempt individual (§7701(b)(5)(E)(ii)).
Student status is granted to individuals temporarily present in the US under an F visa and complying
substantially with immigration law requirements under §7701(b)(d)(D) and Reg. §301.7701(b)-3(b)(4).
Anh appears to meet the statutory definition of a student for purposes of an exempt individual for the SPT
under §7701(b). In addition, Anh has been present in the US as a student and thus exempt for purposes of
the SPT since 2010 or for 4 years through the end of 2013.
The first year election deals with the opportunity for certain individuals to make an election to be treated as
US tax residents if certain conditions are met (§7701(b)(4). Anh has made no such election.
Conclusion 1: Residency
Anh is not a US citizen or green card holder. Anh does not pass the SPT as a result of her exempt status as
a student for fewer than five years and she has not filed an election to be treated as a US tax resident. As a
result, Anh is a nonresident alien for tax purposes.
Issue 2: Taxability of Income
Under §872(a)(2), gross income of a nonresident alien includes gross income which is effectively
connected with the conduct of a US trade or business by that individual. Reg. §1.871-9(a) and (b) state that
nonresident alien students that have income (not scholarships) shall be treated as having income that is
effectively connected with a US trade or business. This is consistent with the general rules under §864(b)
which states that providing personal services within the US is considered effectively connected with a US
trade or business. Note that §872(b)(3) provides an exclusion from gross income for compensation paid by
foreign employers which does not apply to these facts. Additionally, the exclusion under §864(b)(1) does
not apply since Anh’s compensation exceeds $3,000 and she was present in the US for more than 90 days.
Lastly, the US does not currently (as of 2013) have a treaty with Vietnam, Anh’s country of tax residency.
As a result, no exclusion of income is available under treaty benefits for students.
Conclusion 2: Taxability of Income
Anh’s income is effectively connected with a US trade or business. There are no exclusion provisions
which can apply and as a result, Anh’s gross income is taxable for federal income tax purposes.
Issue 3: Employment taxability of income
Social security and Medicare taxes (more generally FICA taxes) are generally applied to wages earned in
“covered employment” (§3121). Services provided in the employ of a college of university are not
considered employment when performed by a student (Reg. §31.3121(b)(10)-2(a)(1)). In addition, under
§3121(b)(19), services performed by a nonresident alien on an F visa are not considered employment if the
services are consistent with the student status. Under immigration law exempt employment includes
Exempt Employment includes: on-campus student employment up to 20 hours a week (40 hrs during
summer vacations); practical training student employment on or off campus; employment as professor,
teacher or researcher (see CFR §214.2(f)(10)).
Conclusion 3: Employment taxability of income
Anh’s employment is associated with her matriculation as a student under the immigration law. In
addition, Anh’s services are provided to a college or university by a student and therefore, are not subject to
employment tax under either of two exceptions provided under §3121.
Another random document with
no related content on Scribd:
pictures. She kept a mirror at the back of her brain. You glanced
within and were able to adjust yourself to your environment. In the
middle of those stairs the little hick from Cowbarn, Iowa, took a
formal oath to be cool, to be collected, to watch her step, and, above
all, to see that nobody called her bluff.
Everything so far was easy. There was not a soul on the stairs. But
no, she was wrong. When she reached the head of them she came
upon a rare old top in livery who bowed as they do in the theatre. He
asked for her card. She handed it to him and he bayed out in a deep
voice that went echoing all over the landing: “Miss Amethyst Du
Rance.”
Mame was quite startled by the sound of her name. Somehow it
didn’t seem to belong to her, any more than this ducal mansion
seemed to belong to her life. She was dreaming, sure. The echoing
“Miss Amethyst Du Rance” seemed to prove it. However, she
decided to keep moving, just as if she were broad awake.
The landing gave on to an enormous room, whose massive double
doors were thrown right back. And standing in the doorway was a
tall, silver-haired dame, dressed in black and white satin, with that
particular kind of fagged look which Mame had first observed in the
bishop’s niece and was no doubt indigenous to the upper strata of
Britain.
As soon as she saw Mame, her tired features lit up in a smile.
“How do you do, Miss Du Rance?” She spoke in a fatigued voice and
held out a flabby hand. “The Duchess should be here in a few
minutes. You will find some of the presents in there. It may interest
you to look at them.”
“Sure,” was Mame’s answer. It was not too ready or too cordial, but
rather in the dry tone that Paula Ling called blasé, which in Europe
was always reckoned good style. Lady Clara de Vere was on in this
scene, and if the skirt was to act her part her words must be few and
chosen with discretion.
Lady C. de V. gave her tortoise-shell folders a shake and then
passed on into the room. It was immense, and this was a happy
dispensation, since it was encumbered with tables on which
hundreds of presents were elaborately laid out.
Such things, however, had no particular interest for Mame. They
could be seen any old day. It was the house itself and the people in it
that were best worth looking at. Here was such a chance of
observing the great world from the inside as might never happen
again. She must learn as much as she possibly could in the short
time at her disposal.
A cursory glance at the presents was all she gave. Then she
wandered away through a suite of smaller rooms, all of which were
unoccupied. But they were very interesting with their richly patterned
carpets wonderful to the tread; glorious tapestries upon the walls,
candelabra which reminded her of certain photographs she had seen
of Versailles; mirrors, pictures, bric-à-brac in rare profusion. It was
freely said in England that the aristocracy had been killed by the war,
but from what she saw of Clanborough House there was life in the
old dog yet.
However, these things did not greatly matter. The folks were what
she was really wishful to see. Therefore she soon returned to the big
room. After a careful survey she fixed herself in a strategic corner
which partly concealed her yet also commanded a fair view of the
open doors and the broad landing and staircase beyond.
In a very few minutes the first of the folks came into view. Even
without the guidance of their costumes Mame would have had no
difficulty in identifying them from their pictures in the papers as the
bride and bridegroom. They made a young and handsome and jolly-
looking pair. Any girl might have been envious; but Mame was far too
busy to indulge that mean passion.
For the folks began to pour in now with a vengeance. Among the first
arrivals was a bunch of Royalties. It was easy to tell these were the
Real Cream, by the care with which they were herded into a distant
corner of the room. Here they stood apart, surrounded by dames-in-
waiting and sconce-bearers. From time to time some old grandee
was brought up to speak to them. Almost the first of these was the
old duchess with the Wellington nose whom Mame’s unknown friend
had claimed for a godmother. She came up leaning on a black cane
and was soon in deep conversation with a particularly upstanding
dame whom Mame guessed by the look of her to be the Queen of
England.
Democrat though Mame was proud to consider herself, she took an
undemocratic interest in all that went on. The look of the Royalties
and the detached way in which they bore themselves interested her
enormously. But she was not able to give them undivided attention.
From her point of view other important things were beginning to
happen.
By now the folks were simply swarming up the stairs. There was a
loud hum of voices; a mighty lot of hand-shaking; considerable
laughter; and as a mob of guests began to percolate into the room
and to circulate around the tables Mame was confronted with the
difficult task of picking out those who were most worth while. Plutes
were so thick on the ground that it called for more than her
knowledge to say who were not worth while.
Suddenly her eye was caught by a braided morning coat which
somehow had a remarkably familiar look. Where had she seen it?
Which Prince was in that morning’s Daily Lyre? Why, to be sure, it
was the young fellow Bill! Which Prince was Bill? A fascinating
inquiry. Before it could be answered, so swiftly swirled this human
vortex, the drama became immensely more complicated. For,
coming in through the door, looking just as gay, just as cool, just as
chic as ever, was her chance acquaintance of the Carlton who had
turned out to be a fairy godmother.
Mame’s excitement mounted so oddly at the sight of this girl, whom
she hardly expected to see again, that she had to restrain a shout of
welcome. This dump, she reminded herself, was not the cafeteria on
Second Street, Cowbarn, Iowa, but Clanborough House, Mayfair,
London, England. In the words of the song the Colonel’s Lady and
Judy O’Grady might be sisters under their skins, but if Miss Du
Rance—the fool puss!—didn’t watch out, she would be tearing a
large hole in the manners of Lady Clara de Vere.
Was the girl going to look towards her corner? Or was she not? It
was no cert. The folks were still pouring in; royalties, senators,
professional beauts. It was no snap. The girl, who was showing
some fine teeth and chattering like a good one, seemed to have a
word for them all.
These were anxious moments. It would be just too bad if Mame
didn’t catch the eye of the unknown friend. The entire future might
turn upon it. She must thank her for the invitation. And this time she
must see that the fairy godmother did not get away without revealing
who she was.
It began to seem, however, as if Mame would have to leave her nice,
comfortable corner and go and chase her. Each moment the place
was getting fuller; each moment more of the folks intervened
between Mame and the quarry. The human tide surging around was
slowly but surely carrying her the other way.
Mame did not want, all the same, to quit a post which so finely
commanded the main doorway. But she must keep the unknown in
the middle of her eye or she would lose her. However, Mame’s luck
was in. The girl was hustled to the right of the big table, instead of to
the left, as Mame had feared that she would be.
This made all the difference. She came back on her tracks. All kinds
of whales were still hanging around her. But Mame could not help
that. It was now or it was never. Still, the Lady Clara de Vere did not
let a whoop or a coo-ee or anything in the nature of a view holloa.
Preserving a ladylike calm, that would have had no success at
Cowbarn, she waved her white-gloved hands and then clapped them
together, one, two, three!
The girl was so engaged with her friends that the first time failed to
do the trick. Repeating the performance, she clapped still louder,
one, two, three! Then the fairy godmother suddenly looked Mame full
in the eye. For one brief instant a kind of mild surprise shone over
her and then she said quite cheerily; “It is sporting of you to show up
here.”
Miss Amethyst Du Rance took a strong pull of her young self. This
scene belonged entire to Lady C. de Vere, a fact she must not forget.
“Not at all,” was Mame’s answer. She prided herself that it was a
good answer. Already she had learned that in London, England, the
Cream when in doubt either said “Quite” or “Not at all.”
“Can you tell me which is King George?” Mame congratulated
herself that her fool mind was functioning. And if the apt question
was put in a voice that at Cowbarn would have ranked as a mere
whisper, even amid the spate of conversation it was fully audible.
“Not here yet,” was the answer, casual but gay. “Shouldn’t wonder if
he’s splitting a small soda with Uncle John.”
“Oh!” said Mame. So cool, so unconcerned, so chaffing was the jane
about it all, that from the tone of her Mame was by no means sure
that she was not a royalty herself.
“I just want to thank you right from my heart, for sending me this
invite.”
“Jolly good of you to come.” Nothing could have been lighter than the
girl’s tone, but in Mame’s opinion nothing could have been more
pleasant.
Her next remark sent her up still higher in Mame’s esteem. “Would
you like some tea?” The words as well as the tone were music.
“I’ll say yes.” Such fervour was in Mame’s reply that it seemed as if
Lady Clara de Vere had missed her cue.
“Come on, then. Let us go downstairs to the buffet before the mob
breaks loose.”
It was not easy to find a way through the crowd now blocking the
large room. But under the accomplished guidance of the girl they
were able to emerge into one of the smaller rooms. Thence they
escaped through a private door concealed behind an imposing arras
and so down an unsuspected staircase, which proved to be a short
cut to a very pleasant region wherein was contained “the eats.”
Mame deduced from the competence of her guide that she had the
run of the place. Evidently she knew her way. “Mustn’t go in there,”
she indicated a room to the right, whose smartly decorated tables
looked particularly enticing. “That’s reserved for the wallahs.
Common you and me had better pile in here.”
The room on the left, although less exclusive, had some good points.
There were tea and cakes in profusion; also a number of snug little
tables at which to enjoy them. None was yet occupied and they were
able to take their pick. The one they chose was just behind the
entrance door, out of the way of everybody.
“Lucky to get in before the squash,” said the guide as they sat down.
“Half London’ll be here soon.”
Hardly had a superb footman, in powder and knee-breeches,
provided a tray containing not merely tea and cakes but also caviar
sandwiches, when the prophecy was borne out. The small tables
began rapidly to fill.
A couple of pigtails, smartly ribboned, whose owners were
immensely voluble, soon commandeered the next table to Mame’s.
Armed with pencils and cards they seemed to be in the middle of a
mysterious game.
“Bags I the noo Murcan am-bass-a-door,” the first flapper, a tall and
leggy sixteen who wore spectacles, could be heard to say in a high-
pitched voice. “Two for his goatee. One for his horn lamps.”
“Bags I the King Maj,” excitedly proclaimed the second flapper, who
was perhaps two years younger than the first.
“King Maj is barred,” said the first wielder of the pencil in a severe
tone. “You know that. Besides, you haven’t seen him.”
“When he comes I bags him,” the second sports-woman maintained
stoutly. “And I shall count ten.”
“It’s not according to the rules.”
“Oh, yes, as they play at Oxford college. They always count ten for
the King Maj.”
Great argument ensued. It was decidedly technical; also inclined to
be heated. Mame’s companion, who seemed to follow it with
amusement mingled with a little good-natured scorn, gently
observed: “These young modern flappers are really dreadful.” And
then she proceeded to attract their attention.
It was not a judicious action.
“Hulloa, Vi!” cried the flappers. They rose as one, and like a pair of
excited young colts came gambolling about Mame’s table.
For all their rather riotous volubility they had a natural attractiveness.
Also there was a strong facial likeness which led Mame to think
these high-spirited creatures must be sisters of her friend.
The assumption was correct.
“This is sister Marjorie,” said the girl, shooting a good-humoured
finger at Miss Spectacles. “And this is sister Doris. The light and the
joy of our home.”
Both flappers ceased their prattle for a moment to look shrewdly at
Mame and to bow quite nicely. Then, as their elders did not seem
inclined to pay them much attention, they suddenly returned to their
argument.
“Vi knows the rules of the Beaver game. Vi knows everything.”
“For the love of Pete go back and eat your buns,” said the elder
sister. “I never heard so much noise since Poppa fell into the canal.”
At this sally each young flapper laughed a loud and merry ha-ha.
Then, giving their manes a shake, they humorously retired to the
next table, where with unabated violence they still continued to
discuss the rules of the Beaver game, which had proved so
demoralising to British flapperdom.
“I expect you have young sisters of your own.” This to Mame by way
of apology.
Mame had no sisters of her own. But she responded to the
friendliness. The more she saw of this new acquaintance the more
she liked her. And the family episode in which she had just been
involved showed her in such a happy light that Mame’s heart
warmed.
She decided to take advantage of the moment by finding out who the
unknown was. Their first meeting was still in her mind. At the Carlton
she had seemed to claim so much for herself that Mame’s
suspicions had been aroused. But she had so amply kept the
promise she had made; and now this afternoon at this big show she
seemed as much top-side as ever, that, without further delay, it
became imperative for the mystery to be cleared up.
Mame took inspiration from another caviar sandwich. And then she
said with the amusing directness that was so characteristic:
“I just love those sisters of yours. But who are you, anyway?”
The girl produced the cigarette case Mame had already had
occasion to admire and neatly detached a visiting card. Handing it
across the table she denoted the name in the centre. “The
Marchioness of Kidderminster.” One finger brushed it lightly. “That’s
my mother.”
“Gee!” breathed Mame softly. She was a hard-shell democrat, but
she was rather impressed by what looked like a famous title.
Below the name of Mommer, in the right-hand corner of the card,
was a string of lesser names, yet in their way quite as intriguing:
Lady Mary Treherne, Lady Alice Treherne, Lady Violet Treherne.
The white-gloved finger came slowly to rest on the last of the three.
“That’s me.”
Mame took the card in her hand. She gazed at it with a slightly
incredulous eye.
“Say, listen, honey!” In the thrill of the moment she quite forgot the
rôle she was so determined to play: “Say, listen, honey, are you one
of this bunch of hicks?”
Lady Violet’s laugh paid honest tribute to this priceless Miss Du
Rance. She was unique. But the new friend was not set up with
herself or her own belongings.
“A long and stupid family.” Impossible not to like the frankness. “But
our mother’s rather a duck.”
“I’ll say so.”
“You’ll like her when you meet her.”
Mame’s eyes glowed hopefully.
“But I fear it won’t be to-day. She’s having to sit up and purr, poor
thing, among all the brass hats. Nothing below the rank of an
ambassador’ll be able to get near her for the next two hours.”
“I’ll just love some time to meet the Marchioness.” Mame spoke
slowly and carefully, after the manner of Mr. Falkland Vavasour. With
his help she was able this time to bring the Lady C. de V. into action.
“Perhaps you won’t mind giving me your private address and your
telephone number.”
“I live in a small hutch of my own,” said Lady Violet. “No. 16b Half
Moon Street, bath hot and cold, company’s own water. Telephone
double o, nine, six, Mayfair.”
Mame carefully wrote the most salient of these details on the back of
the visiting card.
“If you are staying on in London I hope you’ll look me up.”
Lady C. de V. would be de-light-ed.
“I’m always in Tuesdays four to six. Very glad to see you if you’ll
come round.”
“You bet I will.”
But the face of Mame suddenly fell. For she remembered how
terribly narrow was the financial margin upon which she was at that
moment poised. It sprang to the tip of her tongue to ask this new and
influential friend, who no doubt was in everything and had all sorts of
strings to pull, if she could help her in the matter of placing her stuff.
But pride restrained her. Prudence also. This was hardly a moment
in which she could venture to give herself away.
XVIII
TRIUMPH was the emotion uppermost in Miss Amethyst Du Rance
when, next morning, soon after eight, she slipped into her kimono
and, large sponge in hand, made her way down to the bathroom.
Undoubtedly she had come off well. The present feeling of inward
power was some reward for the expenditure of spirit the previous
day had cost.
There was, however, a less pleasing side to the matter. And in the
course of her bath it began most inconveniently to present itself. No
use burking the fact: she had quite outrun the constable. Doing a
swift sum in her head, she was almost horrified to find how deeply
she had dipped into her purse.
Ambition was the Lorelei’s song. It piped the reason out of you. One
extravagance led to another. Like swimming on a summer morning in
a treacherous sea, the play of sunlight on the waves lured you on.
And when at last you turned for home you found it was too late.
When Mame emerged from the bathroom her feeling of elation had
gone. She felt strangely like that symbolical swimmer. Not now would
she be able to get back to the shore. She had dipped so deeply
these last days that even if she booked steerage she would land in
New York with an empty purse. What a reckless little fool! Yet, it was
life after all. From that point of view it was worth it. Certain lines of
the office calendar sprang to her memory.
One crowded hour of glorious life
Is worth an age without a name.
That baby was right. The pity was that the glorious hour lasted so
short a time. And when it came to paying the bill you had to take a
pretty tight hold on yourself. Three weeks more at her present rate of
living and she would be cleaned right out. The thought made her
shiver. If she didn’t find a way in the meantime of gathering honey
she would be up against big trouble. Things looked bad. Still she
could last three weeks; and though in seven months she had earned
hardly a dime, if she kept a stiff lip there was still hope.
She made a fair breakfast, in spite of many and growing fears; and
then went to her favourite nook in the sitting room, whose embrasure
caught any early sun that was around. Writing pad on knee, she
proceeded to jot down in what she had christened her “best
Mamese” an account of the doings at Clanborough House.
It was not a conventional account. She told in the rather hybrid style
which best suited her whimsical pen of the folks who were there, of
how they bore themselves, of what they wore and so on. Even while
her quaint words flowed over the paper she understood the folly of it
all. Who would fall for her sort of guff? Now that Elmer P. had failed
her the sheet anchor was gone. There was perhaps one chance in a
thousand that Paula Ling or Lady Violet might be able to plant it for
her, but even to a nature as full of hope as a young choir boy’s, the
odds seemed long.
All morning she wrote steadily, covering more pages than were ever
likely to be read. She was pleased with her facility of expression,
although it had a tendency to get gay. But persons no brighter than
herself were always pulling worse junk than that on some dub of an
editor.
She would have fair copies made. One she would mail to Paula Ling
and tell her for the love of Mike to place it, as unless she found a
bonanza she would not be able to continue going around in London
society. A second copy should accompany her on Tuesday to 16b
Half Moon Street; and she would beg her new friend to do what she
could with it.
Somehow the second part of the programme struck Mame as a
prospect. Lady Violet, in her way, was a bit of a sorceress. She had
birds of all sorts feeding from the hand. If a lone child could fix it in
that good and clever head how much depended on her friendship, all
was not yet lost.
By luncheon time one fact shone clear. No matter what happened in
the near future to Miss Amethyst Du Rance, her return to New York
must be postponed indefinitely. Tinhorns like herself—to be rather
painfully frank—had quite as good a chance in London as on
Broadway or in the Bronx; and if the worst should happen, the final
process of getting kicked around might seem less painful if applied
by the boot of the alien. London was no cakewalk, New York wasn’t
either; but in the light of recent experience she fancied that of the
two cities London was the less likely to skin you. Even if these comic
islanders knew a dud when they saw one, anything foreign seemed
to inspire them with a sense of chivalry.
New York, on the other hand, did not reach out after a sense of
chivalry towards the foreigner. Or towards small-town persons either.
In New York you just had to pay your way or git.
Rather than surrender to the down-and-out feeling ever gaining upon
her, she went in the afternoon to the pictures, to see her favourite
“Mary and Doug.” Before setting out from Cowbarn into the great
world she had hesitated over a profession. Vaudeville, newspapers,
the movies: her choice had lain between the three. It seemed that
she had chosen wrong. Instead of investing her legacy in
cosmopolitan experience, which seemingly was of no particular use
when it was obtained, she might have given her days and nights to
dancing and singing, for which she believed herself to have
something of a talent, although of course, like every talent, it needed
cultivation; or still better, she might have gone to Hollywood, the
Mecca of her kind, and made a first-hand study of the film.
No use, however, to consider the might have been. Her choice was
made and it had turned out wrong. Every dollar of Aunt Lou’s legacy
was nearly blown in. And there was precious little to show for it. But
she would have to stick it now.
After the pictures, she went and did some window-gazing; and then
she had a cup of tea at a Lyons café. She did not feel equal this
evening to Fotheringay House. Insecurity was getting on her nerves;
and those old stiffs were always trying to call her bluff in
unsuspected ways. For instance, she had heard the high-pitched
voice of the bishop’s niece, blaa-ing over the luncheon table that the
name of Miss Du Rance did not appear to be in the Morning Post list
of those present at Clanborough House.
It was rather late when Mame returned to Montacute Square. Bleak
was the sky and she herself was feeling like thirty cents. The wind
had veered suddenly to the northeast, its favourite quarter in
England now that April was there; and it had a power of making you
wish that you had chosen some other spot in which to enjoy the glad
spring weather.
Mame was hating life as she turned into the Square and was
admitted to Fotheringay House by the little maid Janet.
“No letters for me, I guess?” The perfunctoriness had a touch of
despair.
“Yes, miss. One on the ’all stand.”
Mame passed swiftly on to the table in the hall. Sure enough, a
letter. Typewritten address. Postmark New York. From Paula Ling no
doubt. She had not had a line from Paula since landing in England.
Nice of a go-getter like Paula, with whom time was money, to mail a
few lines. Not ten minutes ago, Mame had feared, so black was her
mood, that Paula Ling would soon be sharing the discard with Elmer
P.
Unopened she crammed the letter into her coat pocket. It would
keep. There was not much time to prepare for dinner; the first gong
had already sounded. Upstairs, however, in her bedroom, with the
electric light turned on, she could deny herself no longer. There was
time for one glance at what Paula had to say. Not that it could be
anything vital. Her own last and most important letter to her friend
had been mailed only four days ago; therefore they must have
crossed in the post.
But even the most imaginative players, as it seems, never quite
know the next turn in the game of life. No sooner had Mame torn
open the letter than out fell a cheque for one hundred and fifty
dollars.
XIX
MAME’S life had known its “moments.” This, however, was just the
biggest it had known. Here was corn in Egypt. She examined the
cheque, pressed it to her lips, and then reëxamined it in order to
make sure that it was real.
There was a covering letter inside the envelope, nicely typed, from
the office of the New York Monitor. So Paula had wangled herself a
billet on the New York Monitor! One for her. It was a live paper. All
sorts of whales wrote for the Monitor. Yes, Paula Wyse Ling was
getting on.
The letter was dated Tuesday, 26th March. It began:
“Dear Mame, You must be wondering what has got me, or shall I
say? what has got your script.”
Mame was perplexed.
“The truth is, things have been happening. I’ve lately taken up the
post of assistant editor on this old-established and important journal.
Still I ought to have acknowledged before now the stuff you sent me.
Part of my excuse is there has been delay in sending it on from
Cowbarn.”
Cowbarn!
“I left the Independent six weeks ago to take up my job here.”
Mame could bear the strain no longer. She gave a hasty glance at
the foot of the page. Paula Ling was not the writer of the letter. The
signature was almost undecipherable, but one time and another
Mame had had much practice in reading it. “Cordially, Elmer P.
Dobree.”
Yes, Elmer P.! No other! Mame’s chest began to tighten rather oddly.
Fancy having doubted the loyalty of the dear boob! She ought to
have known that he was one of the regular fellows. A man in a
million, Elmer P.
In the nicest, modestest, most friendly way, his letter went on to say
how much he liked “A Little Hick in London, England,” the whimsical
name she had given her weekly budget of news. Other folks liked it
too. The copy already to hand was going to be printed in the Monitor.
He hoped she wouldn’t mind if it was pulled about a bit. The Monitor
had so many calls on its space. But he was sure she would like to
know that the chief editor’s fancy had been really tickled by the first-
hand impressions and her way of putting them across. He would like
her to do the big houses and the people she saw there; Buckingham
Palace, if possible, the Houses of Parliament, Hurlingham, the Opera
and so on, and if the series turned out as good as Elmer personally
was sure it would, he felt he could promise on the Monitor’s behalf
that its interest in her would continue.
Mame had no thought of vaudeville now. But she executed a pas
seul in the confined space provided by an apology for a bedroom
carpet. The letter was real, hard though it was to believe it. If,
however, it had not been for that cheque for one hundred and fifty
priceless dollars, she would have been forced to conclude that even
Elmer P. was trying to put one over on her.
XX
THE letter from New York filled Mame with new energy, fresh hope.
Next day she went about the town with a changed outlook. She
might not have been the same girl. A wide vista had astonishingly
opened; not that she had ever doubted really that she was going to
make good.
It seldom rains but it pours.
This attitude of simple faith received further justification in the course
of the day. As she passed the Tube bookstall in Leicester Square a
week-old copy of High Life chanced to catch her eye. And there, on
the very front page of that rather mean-looking periodical, was an
article entitled “A Little Hick in London, England.”
She promptly recognised it as one of the two she had submitted to
that journal. The discovery gave her a bit of a shock. Not so much as
a word of acknowledgment had been received from Mr. Digby
Judson, let alone any suggestion of payment, yet here was the stuff
in the cold glamour of print.
Mame was wroth. She had also a feeling of modest elation; but at
the moment anger was paramount.
At all times a believer in action, she promptly made her way down
the street and got a bus that would take her to Tun Court. This
business should be settled without delay.
When she had climbed the dark stairs, however, which led to the
editorial offices of High Life, something of a shock awaited her.
Instead of her knock on the door marked Inquiries being answered
by the fair student of Duchess Novelettes, a voice loud and gruff
bade her “Come in!”
The room’s sole occupant was a large, heavy man who exuded a
powerful odour of beer and tobacco. Mame had no difficulty in sizing
him up at once as a common roughneck.
“Can I see Mr. Digby Judson?” Mame had the asperity which springs
from a sense of grievance.
“Mr. Who?” The roughneck blinked torpidly.
“The editor of this journal.” Mame’s asperity grew.
“Editor?” The roughneck looked like falling asleep. “Sorry to
disappoint yer, missy, but I don’t think yer can.”
“Why not?”
“Mr. Bloomin’ Editor’s ’opped it.”
“I don’t get you.”
“Skedaddled. Taken the petty cash. Overdrawn at the bank. Done a
moonlight flit last night.”
“Oh!” said Mame sternly as light broke upon her. “You mean he’s
quit.”
The torpid gentleman having reinforced his lucidity by a pull at his
jug of beer, remarked pensively: “Yuss. The pawty in question ’as
quit.”
Mame’s vision of being paid on the spot in honest cash for value
honestly given began to recede. “Well, I want my money.” But the
futility of such a demand was clear.
“Other pawties wants it too,” said the roughneck mildly. “That’s why
I’m setting here.”
The light continued to broaden. “Then you must be a-a-what-do-you-
call-em?” Mame was confronted suddenly by a limit to her
knowledge of the British idiom.
“A bailiff.” The roughneck buried his face in the jug.
“Can you tell me how to get the bucks he owes me?” Mame had
given up all hope. But there was no harm in asking the question.
The bailiff shook his large and ugly yet not ill-humoured head. “A bad
egg, I fancy. The paper’s broke. Between you and me, missy”—the
beery voice grew confidential—“I’ve been put in by the debenture
holders. As you might say I represent a little matter of four thousand
quid.”
“Sakes! Then I guess I’ll not be able to connect.”
“Clever if you do, missy, take it from me.”
Mame slowly adjusted her thinking cap. She regarded herself as the
possessor of a natural business head. And in the matter of her rights
she did not believe in quitting too early.
She addressed the bailiff sternly. “Who you acting for?”
“The debenture holders.”
“I don’t get you. Who are they anyways?”
The man produced a wad of greasy-looking papers from the interior
of his coat. He moistened his thumb, selected a dirty card and
handed it to Mame. “Them’s the solicitors.”
“Messrs. Ackerman, Barton and Profitt,” the card informed Mame.
“That’s the firm. Their office is just acrost the road in Chawncery
Lane.”
Mame thanked the roughneck for his information and then obtained
permission to keep the card. The address might come in useful. All
the same there was nothing at the moment to lead one to suppose
that it would.
From what the bailiff said, she would be wise to write off the money
due her from High Life as a bad debt.
XXI
TUESDAY afternoon saw Miss Amethyst Du Rance armed cap-à-pie
for a second descent upon London society.
Since the opportune arrival of Elmer P.’s letter the invitation to Half
Moon Street had been much in her thoughts. It opened up new
possibilities. And the friend she had so providentially found was likely
to prove of great value in the life she aspired to lead.
Having received her baptism of fire at Clanborough House, Mame
had none of the qualms which, on that occasion, had assailed her.
Within her now was a happy feeling of success. Moreover, a black
cloud had been lifted from her mind. Elmer P.’s letter had changed
everything.
By nature adventurous, she was stimulated by the prospect of big
things. To begin with, she bestowed great pains upon her
appearance. She had lately discovered that she paid for dressing;
and it gave her real pleasure to linger over the last touches to her
small but attractive self.
She had, too, an instinct for doing things well. The afternoon was
fine, there was spring in the air, but she could afford a taxi to Half
Moon Street. Therefore she taxi’d. It gave her a sense of being in the
picture to drive up in state to Lady Violet’s flat.
It was about a quarter to four when she found herself going up in the
lift—a handier word than elevator—to 16b on the second floor. She
pressed a neat button and a dinky maid, who was much too smart
for a hired girl, in snowy cap and apron and with a prim English look,
ushered the visitor across a tiny entrance hall into a singularly cosy
and artistically furnished drawing room. To Mame it was quite the last
word in feminine elegance.
It was a little early for callers and she had the good luck to find Lady
Violet alone. As soon as the visitor was announced the hostess laid
aside the novel she was reading, got up cheerily and welcomed her
with that forthcomingness which from the first had taken Mame.
There was great charm in this girl and Mame reacted to it. Here were
a big outlook and first-hand knowledge of the great world. To Lady
Violet life was a game; human nature an amusing spectacle, a kind
of comedy farce; men and women, no matter how highly placed,
were merely players. But she had not a spark of ill nature; at least
Mame as yet had not detected one. Nor, as far as Mame could tell,
was she grinding her own axe. The top-notchers Mame had been
privileged to look on in New York from a respectful distance were not
folks of this kidney. They were mighty careful to keep you at arm’s
length, unless you could make them feel that you had something
substantial to give them in return for any interest they condescended
to take in a person as raw as yourself.
This afternoon, however, Mame was not feeling quite so raw as she
had done. Clanborough House combined with the letter from New
York had somehow given her a more substantial basis. It is
wonderful what a feeling of success can do. Besides, Lady Violet, as
usual, was just as easy as pie.
She told the visitor how pleased she was to see her and fixed her
snugly in a chair.
“When are you thinking of going home?”
“I expect I’ll stay on through the summer now.” Mame had a slight air
of importance. “I like the life here and I’ve just had a commission to
report it for the New York Monitor.”
“That’ll be interesting.”
Mame hoped it would be. If she was careful how she played her
cards it might be very interesting indeed, but the problem of the
moment was the exact order in which to do so.
She was a creature of quick intuitions. And she promptly decided
that the perfect frankness which up till now had served her so well
was decidedly the card to bank on.

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6-48 To: Files

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Date: Today’s date

Subject Allocation between Alimony and Child Support

How much alimony can Tom deduct?

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related expense child care credit)

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Code §§61, 119, 132

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Code §§451, 6012(b)

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Cases Keenan v Bowers, 91 F Supp 771 (1950 DC SC) (not allowed)

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