Fundamentals of Taxation 2015 8th Edition Cruz Solutions Manual instant download all chapter

Fundamentals of Taxation 2015 8th
Edition Cruz Solutions Manual

Go to download the full and correct content document:
https://testbankdeal.com/product/fundamentals-of-taxation-2015-8th-edition-cruz-solut
ions-manual/
More products digital (pdf, epub, mobi) instant
download maybe you interests ...
Fundamentals of Taxation 2015 8th Edition Cruz Test

Bank
https://testbankdeal.com/product/fundamentals-of-
taxation-2015-8th-edition-cruz-test-bank/
Fundamentals of Taxation 2014 7th Edition Cruz

Solutions Manual
taxation-2014-7th-edition-cruz-solutions-manual/
Fundamentals of Taxation 2019 Edition 12th Edition Cruz

Solutions Manual
taxation-2019-edition-12th-edition-cruz-solutions-manual/

Solutions Manual
Solutions Manual
Fundamentals of Taxation 2014 7th Edition Cruz Test

Bank
taxation-2014-7th-edition-cruz-test-bank/

Test Bank
taxation-2016-edition-9th-edition-cruz-test-bank/

Test Bank

Test Bank
Solutions Manual
CHAPTER 8 – SOLUTIONS
END OF CHAPTER MATERIAL
Discussion Questions
1. Can the owner of rental property be treated as conducting a trade or business with
respect to the rental property? If so, what must the taxpayer do for it to be considered a
trade or business?
Answer:
The taxpayer must differentiate between rental property and a trade or
business involving rental property. Generally, if the taxpayer materially
participates in the rental activity and provides significant services to the
renter such as maid services, and is considered a real estate professional,
then the rental activity should be reported on Schedule C as a trade or
business. A taxpayer materially participates in the rental activity if he or she
works on a regular, continuous, and substantial basis in the operation of the
rental.
Learning Objective: 08-01
Topic: Rental Property Income and Expenses
Difficulty: 1 Easy
EA: No
2. For rental expenses to be deductible, what criteria must be met? For this question,
assume no personal use of the rental property.
Answer:
Generally, the same rules apply for rental property as for business expenses
– ordinary, necessary, and reasonable. Deductible expenses include
advertising, depreciation, repair and maintenance, interest, taxes,
management fees, and travel expenses. General repairs and maintenance are
deductible from gross rental income. However, no deduction is allowed for
amounts that are “capital improvements.”
Difficulty: 1 Easy
EA: Yes
Cruz et al. Fundamentals of Taxation 2015 8-1 © 2015 McGraw-Hill Education

Solutions Manual
3. What is the difference between a deductible repair expense and a capital improvement
of a rental property?
Answer:
Allowable repairs are expenditures that neither materially add to the value
of the property nor appreciably prolong the property’s life. Any repairs in
the nature of a replacement are capitalized and depreciated over the
appropriate depreciable life. Repairs are allowed as an immediate expense
deduction, but capital improvements are added to the value of the property
and are depreciated over 27 ½ years (residential) or 39 years (non-
residential).
Difficulty: 1 Easy
EA: Yes
4. When depreciation is deducted on a rental property, why is it beneficial for the

taxpayer to allocate the cost of the property to other assets (furniture, appliances, etc.)
connected with the property, rather than allocating the entire lump sum to the building
itself?
Answer:
To accelerate the tax deduction, the taxpayer should allocate the purchase
price to the structure and to furniture, appliances, carpet, as well as to
shrubbery or fences. These assets are depreciated over 5 to 15 years.
Without the allocation, the lump sum of the rental property is depreciated
over 27 ½ (or 39 years), thus delaying depreciation.
Difficulty: 2 Medium
EA: Yes
5. Can travel expenses to and from rental property be deducted? If so, what are the rules
concerning the deductibility of travel, and how is the deduction calculated? (Hint: You
may need to review Chapter 6 to help with this answer.)
Answer:
Travel costs from the taxpayer’s home to a rental property are deductible if
the travel is for business purposes, for example, to conduct repairs or attend
a condo association meeting. The standard mileage rate for business travel is
used in calculating any travel expenses concerning rental property.
Topic: Personal Use of Rental Property
Difficulty: 1 Easy
EA: Yes

Solutions Manual
6. Les’s personal residence is in uptown New Orleans. Every year during Mardi Gras,
Les rents his house for 10 days to a large corporation that uses it to entertain clients.
How does Les treat the rental income? Explain.
Answer:
If a residence is rented for less than 15 days, the property is considered
“primarily personal” property. When property is rented for less than 15
days, none of the rental income derived is included in gross income, and no
deduction is allowed for rental expenses, other than the mortgage interest
and property taxes that is usually allowed as itemized deductions.
Difficulty: 1 Easy
EA: Yes
7. Two methods are used to allocate expenses between personal and rental uses of
property. Explain the Tax Court method and the IRS method. Which method is more
beneficial to the taxpayer?
Answer:
The two methods used are the IRS method and the Tax Court method. Using
the IRS method, expenses are allocated based on the ratio of total rental days
to total days used. The rest of the expenses are allocated to personal use.
Using the Tax Court method, interest and taxes are allocated by the ratio of
total rental days to the days in the entire year (365 days if held for the full
year). This method yields a smaller percentage of the interest and taxes
allocated to rental income. This allows a larger portion of other rental
expenses to be used to offset rental income. The interest and taxes are
deducted on Schedule A anyway. The Tax Court method is generally more
beneficial to the taxpayer because less interest expense and real property
taxes are allocated to the rental use which allows more of the remaining
expenses to be deducted when the gross income limitation applies.
EA: Yes
8. Discuss the three categories of vacation home rentals. Include in your discussion how
personal use of the property affects the reporting of income and losses of vacation homes.
Answer:
Vacation rental property can be classified as primarily rental use, primarily
personal use, and personal/rental use. The category depends on the number

Solutions Manual
of total rental days to total personal use days the rental property is used.
When property is rented for less than 15 days, none of the rental income
derived from the short rental period is included in gross income, and no
deduction is allowed for rental expenses. If the property is used personally
for more than the greater of 14 days or 10 percent of the number of rental
days during the year and rented for 15 days or more, expenses are allowed
only to the extent that there is income, disallowing losses. A property that is
rented for 15 days or more and used personally for no more than the greater
of 14 days or 10 percent of the total days the property is rented is considered
primarily rental, and losses may be allowed subject to passive loss rules.
Passive loss rules, without income limitations, allow losses from rental
properties up to $25,000.
EA: No
9. What is considered personal use of a vacation rental property?
Answer:
Personal use includes use of the property by the taxpayer (unless he is
working on the property) or his family or non-family’s use of the rental
property free of a rental charge. If any family member uses the rental
property, the days are considered personal use days, even if they paid fair
market value for the rental.
Difficulty: 1 Easy
EA: No
10. Jake has a vacation rental house at the beach. During the tax year, he and his
immediate family used the house for 12 days for a personal vacation. Jake and his son
spent two more weekends (4 days) repairing steps from the property to the beach. The
beach house was rented for 100 days. How is the beach house categorized this year?
Explain your answer.
Answer:
The house is categorized as primarily rental since the personal use of the
property was 12 days. If rental property is used for no more than 14 days for
personal purposes, it is considered “primarily rental” property. Days spent
working on the house are not considered personal days.
EA: No

Solutions Manual
11. Would your answer to Question 10 change if Jake also rented his house (at fair
market value) to his brother and his family for 7 days?
Answer:
Yes, because then the property would be used for more than 15 days for
personal use – to a total of 19 days. Rental by family members still counts as
personal use even if it is rented for the fair market value.
EA: No
12. What is royalty income, and which forms are used to report it? What factors
determine which forms should be used?
Answer:
A royalty is a payment for the right to use intangible property. Royalties
may be received from books, stories, plays, copyrights, trademarks,
formulas, patents, and from the exploitation of natural resources such as
coal, gas, or timber. When royalties are received, the payer is required to
send the recipient a 1099-MISC. If the royalty is a result of a trade or
business, the taxpayer should report the royalty on Schedule C. If the
royalty income is produced by a non-trade or business activity (such as an
investment) then the income should be reported on Schedule E.
Topic: Royalty Income
EA: Yes

Solutions Manual
13. Briefly describe the types of income that are reported on a Schedule E.
Answer:
Income and expenses associated with rental, royalty, and flow-through
entities are the types of items known as “for the production of income”
property and are reported on Schedule E of Form 1040. Income and
expenses from rentals and royalties are reported in Part I of Schedule E, and
certain items from flow-through entities such as partnerships, LLCs, S
corporations, and estates and trusts, are reported in Part II and Part III of
Schedule E.
EA: Yes
14. What is meant by the term flow-through entity? Give some examples.
Answer:
Flow-through entities are given this name because they do not pay income
taxes. Instead, the net share of income or loss from the entities flows-through
to the tax returns of its partners/shareholders/owners. These parties then
pay the tax on their share of the flow-through entity’s income. Common
flow-through entities are partnerships, S corporations, LLCs, estates, and
trusts.
Topic: Flow-through Entity
Difficulty: 1 Easy
EA: No
15. How are the income and losses from a flow-through entity reported to the taxpayer
(partner, shareholder or owner)? Are all of the items from the flow-through entity
reported on the same form? Explain.
Answer:
The flow-through entity must supply each taxpayer a Schedule K-1,
indicating the taxpayer’s share of income, expenses, or losses. The
taxpayer’s share is then reported on various places on Form 1040. In the
case of a partnership, the K-1 reports the partner’s share of ordinary
income from the partnership and other separately stated items.
Separately stated items are not included in the income or expenses of the
partnership but are, instead, allocated separately to each of the partners.

Solutions Manual

Difficulty: 1 Easy
EA: Yes

Solutions Manual
16. Why are the income and losses (or expenses) separately stated to the partner,
shareholder or owner, and on what form(s) are they reported?
Answer:
Separately stated items are reported on the K-1. All items that can have
different tax treatment for different types of partners are separately stated.
For example, a corporate partner cannot deduct net capital losses, whereas
an individual partner can deduct up to $3,000 of capital losses against
ordinary income.
EA: No
17. Why are charitable contributions stated separately on the K-1 but not deducted on a
partnership return?
Answer:
For most individual taxpayers, charitable deductions are limited to 50% of
AGI. The limit occurs at the individual level and could result in a different
outcome depending on the individual taxpayer’s tax situation.
EA: No
Multiple Choice
18. On August 1 of the current year, Jennifer and Tyler purchased a cabin for $950,000.
Of that amount, $500,000 was for the land. How much depreciation deduction can
Jennifer and Tyler take in the current year assuming that the cabin was rented starting on
the purchase date? (You may need to refer to the depreciation tables in Chapter 6.)
a. $0.
b. $6,138.
c. $8,865.
d. $16,364.
Answer: b
Feedback: ($950,000 - $500,000)=$450,000 x 1.364%=$6,138.
EA: Yes

Solutions Manual
19. Jermaine owns a rental home in Lake Tahoe and traveled there from his home in San
Francisco for maintenance and repairs three times this year. The round trip from San
Francisco to Lake Tahoe is approximately 167 miles. How much travel cost can
Jermaine deduct for the current year related to the rental home in Lake Tahoe?
a. $0.
b. $92.
c $281.
d. $305.
Answer: c
Feedback: 167 miles x 3 x 56 cents = $281.
EA: Yes
20. Dennis receives $11,100 during the current tax year from Blanca for some office
space in Anaheim, California. The rent covers eight months, from August 1 of the
current year to March 31 of the following year. The amount also includes a security
deposit of $1,500. How much should Dennis report as rental income in the current tax
year?
a. $1,200.
b. $6,000.
c. $9,600.
d. $11,100.
Answer: c
Feedback: $11,100 - $1,500 = $9,600.
EA: Yes
21. Ginny owns a house in northern Wisconsin that she rents for $1,600 per month.
Ginny does not use the property personally. While she was in Europe for Christmas, the
water heater on the property failed, and her tenants repaired it for $1,200. For the
following month’s rent (January), her tenants paid her $400 for rent ($1,600 - $1,200).
What amounts should Ginny include for rental income and repair expense, respectively,
for January?
a. $400; $0.
b. $1,200; $400.
c. $1,600; $400.
d. $1,600; $1,200.

Solutions Manual
Answer: d
Feedback: Report gross rent and all expenses.
EA: Yes
Cruz et al. Fundamentals of Taxation 2015 8-10 © 2015 McGraw-Hill

Education
Solutions Manual
22. James owns a home in Lake Tahoe, Nevada, that he rented for $1,600 for two weeks
during the summer. He lived there for a total of 120 days, and the rest of the year the
house was vacant. The expenses for the home included $6,000 in mortgage interest, $900
in property taxes, $1,300 in maintenance and utilities, and $2,500 in depreciation. How
much rental income from the Lake Tahoe home would James report for the current year?
a. $0.
b. $567.
c. $1,600.
d. $9,100.
Answer: a
Feedback: $0 income is reported since the property is categorized as primarily
personal.
Difficulty: 3 Hard
EA: Yes
23. Assume the same facts as Question 22, except that James rented the Lake Tahoe
home for 40 days for $4,600. What is his net income or loss from the rental of his home
(without considering the passive loss limitation)? Use the IRS method for allocation of
expenses.
a. $0.
b. $1,925 net income.
c. $4,600 net income.
d. $6,100 net loss.
Answer: b
Feedback: $4,600 – [40/160($6,000+$900+$1,300+$2,500)] = $1,925 net income.
Difficulty: 3 Hard
EA: Yes
24. Which of the following items is not deductible as rental expense?

a. Advertising.
b. Repairs and maintenance.
c. New bathroom addition.
d. Insurance.
Answer: c
Feedback: New bathroom addition would be considered a capital improvement and
therefore capitalized and depreciated and not deductible as rental expense.

Education
Solutions Manual
EA: Yes
25. Darren and Nikki own a cabin in Mammoth, California. During the year, they rented
it for 45 days for $9,000 and used it for 12 days for personal use. The house remained
vacant for the remainder of the year. The expenses for the house included $8,000 in
mortgage interest, $2,000 in property taxes, $1,200 in utilities, $750 in maintenance, and
$4,000 in depreciation. What is their net income or loss from their cabin rental (without
considering the passive loss limitation)? Use the IRS method for allocation of expenses.
a. $0.
b. $3,592 net loss.
c. $6,950 net loss.
d. $9,000 net income.
Answer: b
Feedback: $9,000 – [45/57($8,000+$2,000+$1,200+$750+$4,000)] =$3,592 net loss.
Difficulty: 3 Hard
EA: Yes

Education
Solutions Manual
26. Sean and Jenny own a home in Boulder City, Nevada, near Lake Mead. During the
year, they rented the house for 40 days for $3,000 and used it for personal use for 18
days. The house remained vacant for the remainder of the year. The expenses for the
house included $14,000 in mortgage interest, $3,500 in property taxes, $1,100 in utilities,
$1,300 in maintenance, and $10,900 in depreciation. What is the deductible net loss for
the rental of their home (without considering the passive loss limitation)? Use the Tax
Court method for allocation of expenses.
a. $0.
b. $388.
c. $8,090.
d. $27,800.
Answer: a
Feedback: No net loss deduction is allowed for personal/rental properties.
EA: Yes
27. Nicolette and Brady own a cabin in Lake Arrowhead, California that they rent out
during the winter and use the rest of the year. The rental property is categorized as
personal/rental property, and their personal use is determined to be 68% (based on the
IRS method). They had the following income and expenses for the year (after
allocation):
Gross rental income $9,500

Interest and taxes 6,000
Utilities and maintenance 2,500
Depreciation 4,300
How much can Nicolette and Brady deduct for depreciation expense related to this
property for this year on their tax return?
a. $0.
b. $1,000.
c. $4,300.
d. Answer cannot be determined.
Answer: b
Feedback: $9,500-$6,000-$2,500=$1,000; only $1,000 is left to offset depreciation
expense since no loss is allowed for personal/rental properties.
Difficulty: 3 Hard
EA: Yes

Education
Solutions Manual
28. Colin is a high school chemistry teacher who owns some land in Oklahoma that
produces oil from its small oil reserve. On what schedule should Colin report the royalty
income he receives?
a. Schedule A.
b. Schedule C.
c. Schedule E.
d. Schedule SE.
Answer: c
Feedback: Schedule E is used to report royalty income from investments.
Difficulty: 1 Easy
EA: Yes
29. Sally is a full-time author and recently published her third mystery novel. The
royalty income she receives from the publisher this year should be reported on what
schedule?
a. Schedule E.
b. Schedule D.
c. Schedule A.
d. Schedule C.
Answer: d
Feedback: Schedule C is used to report income earned from a trade or a business.
Difficulty: 1 Easy
EA: Yes
30. What is the maximum amount of passive losses from a rental activity that a taxpayer
can deduct against active and portfolio income per year (assuming no passive loss
limitation due to AGI or personal use of the property)?
a. $0.
b. $15,000.
c. $25,000.
d. $50,000.
Answer: c
Feedback: Passive losses from rental activity are limited to $25,000 per year before
AGI limitations apply.
EA: No

Education
Solutions Manual
31. Which of the following entity (ies) is (are) considered flow-through?

a. Partnership.
b. S Corporation.
c. LLC.
d. All are considered flow-through entities.
Answer: d
Feedback: Partnership, limited liability company (LLC), S Corporations, and
certain types of trusts and estates are considered flow-through entities.
EA: No
32. From which of the following flow-through entities is ordinary income (K-1)
considered self-employment income?
a. Partnership.
b. S Corporation.
c. Trusts.
d. Estates.
Answer: a
Feedback: Ordinary income from partnerships is considered self-employment
income.
EA: No

Education
Solutions Manual
Problems
33. Ramone is a tax attorney and he also owns an office building that he rents for
$8,500/month. He is responsible for paying all taxes and expenses relating to the
building’s operation and maintenance. Is Ramone engaged in the trade or business of
renting real estate?
Answer:
No, the office building would be treated as rental property and not a trade or
business. The general rule is that Ramone must materially participate in the
rental activity and provide substantial services to the rental property.
Additionally, Ramone must be considered a real estate professional if the
activity is to be treated as a trade or business.
EA: No
34. Kelvin owns and lives in a duplex. He rents the other unit for $750 per month. He
incurs the following expenses during the current year for the entire property:
Mortgage interest $7,500

Property taxes 2,000
Utilities 1,500
Fixed light fixture in rental unit 100
Fixed dishwasher in personal unit 250
Painted entire exterior 1,300
Insurance 1,800
Depreciation (entire structure) 7,000
How are the above income and expenses reported on Kelvin’s tax return? On
what tax form(s) are these amounts reported?
Answer:
Personal Schedule A Schedule E

Income $9,000
Mortgage 3,750 $3,750 (3,750)
Interest
Property Taxes 1,000 1,000 (1,000)
Utilities 750 N/D (750)
Fix Light (100)
(Rental)
Fix Dishwasher 250 N/D
Paint Exterior 650 N/D (650)

Education
Solutions Manual
Insurance 900 N/D (900)

Depreciation 3,500 N/D (3,500)
$4,750 ($1,650)

Difficulty: 3 Hard
EA: Yes

Education
Solutions Manual
The $4,750 of personal expenses for taxes and interest are deductible as
itemized deductions (see Chapter 5). The other personal expenses are non-
deductible. The rental loss of $1,650 is deductible subject to the passive loss
rules (Chapter 13).
35. In the current year, Sandra rented her vacation home for 75 days, used it for personal
use for 22 days, and left it vacant for the remainder of the year. Her income and expenses
before allocation are as follows:
Rental income $15,000

Real estate taxes 2,000
Utilities 1,500
Mortgage interest 3,800
Depreciation 7,200
Repairs and Maintenance 1,300
What is Sandra’s net income or loss from the rental of her vacation home? Use the Tax
Court method.
Answer:
Schedule E Schedule A
Rental Income $15,000
Real Estate Taxes $2,000 * (75/365) (411) $1, 589
Utilities $1,500 * (75/97) (1,160)
Mortgage Interest $3,800 * (75/365) (781) 3,019
Repairs and $1,300 * (75/97) (1,005)
Maintenance
Depreciation $7,200 * (75/97) (5,567)
Net Rental Income $6,076

Difficulty: 3 Hard
EA: Yes

Education
Solutions Manual
36. Alice rented her personal residence for 13 days to summer vacationers for $4,500.
She has AGI of $105,000, before the rental income. Related expenses for the year
include the following:
Real property taxes $4,500

Utilities 5,000
Insurance 900
Mortgage interest 7,000
Repairs 800
Depreciation 15,000
Calculate the effect of the rental on Alice’s AGI. Explain your rationale, citing
tax authority.
Answer:
Since the rental days are 14 days or less, none of the income and rental
expenses are reported (IRC §280(A)(g)). Alice’s income remains unchanged
at $105,000. The mortgage interest and property taxes are deductible on
Schedule A as itemized deductions.
Difficulty: 3 Hard
EA: Yes

Education
Solutions Manual
37. Matt and Marie own a vacation home at the beach. During the year, they rented the
house for 42 days (6 weeks) at $890 per week and used it for personal use for 58 days.
The total costs of maintaining the home are as follows:

Property taxes 700
Insurance 1,200
Utilities 3,200
Repairs 1,900
Depreciation 5,500
a. What is the proper tax treatment of this information on their tax return using the Tax
Court method?
b. Are there options available for how to allocate the expense between personal and
rental use? Explain.
c. What is the proper tax treatment of the rental income and expenses if Matt and Marie
rented the house for only 14 days?
Answer:
Schedule E Schedule A
Income 6 weeks * $890 $5,340
Mortgage Interest (42/365) * $4,200 483 $3,717
Property Taxes (42/365) * $700 81 619
Insurance (42/100) * $1,200 504
Utilities (42/100) * $3,200 1,344
Repairs (42/100) * $1,900 798
Depreciation (limited to Net 2,130
Rental Income)
Net Income $0
a. The proper tax treatment is to allocate the expenses between personal

and rental expenses. Schedule E would show $0 net income for this
property and remaining taxes and interest would be deducted on
Schedule A.
b. The taxpayer can use the Tax Court method or the IRS method to
allocate expenses. The Tax Court method allows for an overall larger
deduction. However, the IRS has maintained it will continue to fight the
Tax Court method.
c. In this case, the property would be primarily personal; and none of the
income would be included and only the interest and taxes would be
deductible on Schedule A.

Education
Solutions Manual

Difficulty: 3 Hard
EA: Yes
38. Janet owns a home at the lake. She incurs the following expenses:

Property taxes 800
Insurance 1,500
Utilities 1,800
Repairs 300
Depreciation 4,000
What is the proper treatment of these rental income and expenses in each of the following
cases? Use the Tax Court allocation method, if applicable.
Case Rental Income Days Rented Personal Use Days

A $9,000 45 10
B 12,000 55 25
C 6,000 10 30
D 22,000 365 0
Answer:
Case A B C D
Schedule Sch. A/No Schedule Sch. A/No *(see Schedule
E Deduction E Deduction below) E
Income $9,000 $12,000 $22,000
Mortgage (45/365): 1,140 – (55/365): $1,104- (1,300)
Interest (160) Sch. A (196) Sch. A
Property (45/365): 701 – (55/365): 679 – (800)
Tax (99) Sch.A (121) Sch. A
Insurance (45/55): 273 N/D (55/80): 469 N/D (1,500)
(1,227) (1,031)
Utilities (45/55): 327 N/D (55/80): 562 N/D (1,800)
(1,473) (1,238)
Repair (45/55): 55 N/D (55/80): 94 N/D (300)
(245) (206)
Depreciation (45/55): 727 N/D (55/80): 1,250 N/D (4,000)
(3,273) (2,750)
Rental $2,523 $6,458 $0 $12,300
Income
*For less than 15 days rental, there is no income or rental expense reported.
Interest and taxes are deducted on Schedule A.

Education
Solutions Manual

Difficulty: 3 Hard
EA: Yes
39. Randolph and Tammy own a second home. They spent 45 days there and rented it
for 88 days at $150 per day during the year. The total costs relating to the home include
the following:

Property taxes 1,200
Insurance 1,800
Utilities 2,300
Repairs 1,500
Depreciation 6,500
What is the proper treatment of these items relating to the second home? Would you use
the Tax Court allocation or the IRS allocation? Explain.
Answer:
Tax Court – Schedule E Personal

Income $13,200
Mortgage (88/365) * ($1,085) $3,415 To Schedule A
Interest 4,500 = 1,085
Property Tax (88/365) * ($289) 911 To Schedule A
1,200 = 289
Insurance (88/133) * ($1,191) 609 Non-deductible
1,800 = 1,191
Utilities (88/133) * ($1,522) 778 Non-deductible
2,300 = 1,522
Repairs (88/133) * ($992) 508 Non-deductible
1,500 = 992
Depreciation (88/133) * ($4,301) 2,199 Non-deductible
6,500 = 4,301
Net Rental $3,820
Income
IRS Method – Schedule E Personal

Income $13,200
Mortgage (88/133) * (2,977) $1,523 To Schedule A
Interest 4,500 = 2,977
Property Tax (88/133) * (794) 406 To Schedule A
1,200 = 794
Insurance (88/133) * (1,191) 609 Non-deductible

Education
Solutions Manual
1,800 = 1,191
Utilities (88/133) * (1,522) 778 Non-deductible
2,300 = 1,522
Repairs (88/133) * (992) 508 Non-deductible
1,500 = 992
Depreciation (88/133) * (4,301) 2,199 Non-deductible
6,500 = 4,301
Net Rental $1,423
Income
The IRS method produces the least amount of net rental income for
Randolph and Tammy and would be the preferable allocation of expenses for
them. Net rental income reported using the Tax Court method is $2,397
greater than they are under the IRS method. Itemized deductions however,
are $2,397 greater under the Tax Court method.
Difficulty: 3 Hard
EA: Yes
40. Mabel, Loretta, and Margaret are equal partners in a local restaurant. The restaurant
reports the following items for the current year:
Revenue $600,000
Business expenses 310,000
Investment expenses 150,000
Short-term capital gains 157,000
Short-term capital losses (213,000)
Each partner receives a Schedule K-1 with one-third of the preceding items reported to
her. How must each individual report these results on her Form 1040?
Answer:
Revenues $600,000
Expenses 310,000
Ordinary Income $290,000
x 1/3
Page 2 of Schedule E $ 96,666
Investment Expense $150,000

x 1/3
Schedule A $ 50,000
(limited to investment income)

Education
Solutions Manual
Net short-term capital loss ($56,000)

($157,000 - $213,000)
x 1/3
Schedule D ($18,666)
The loss is netted against other short-term and long-term capital gains.

Difficulty: 3 Hard
EA: Yes
41. Nicole and Mohammad (married taxpayers filing jointly) are equal owners in an S
corporation. The company reports sales revenue of $450,000 and expenses of $310,000.
The corporation also earns $20,000 in taxable interest and dividend income and has
$15,000 investment interest expense. How are these amounts treated for tax purposes?
Answer:
Revenue $450,000
Expenses 310,000
Ordinary Income, reported on Schedule E, Page 2 $140,000
Interest and dividends of $20,000 are reported as interest and dividends

separately on Schedule B, Form 1040. The investment interest expense is an
itemized deduction on Schedule A.
EA: Yes
42. Dominique and Terrell are joint owners of a bookstore. The business operates as an
S corporation. Dominique owns 65%, and Terrell owns 35%. The business has the
following results in the current year:
Revenue $1,500,000
Charitable contributions 50,000
Short-term capital losses 4,500
Long-term capital gains 6,000
How do Dominique and Terrell report these items for tax purposes?
Answer:
Total Dominique Terrell

Education
Solutions Manual
(65%) (35%)
Revenues $1,500,000
Expenses 750,000
Ordinary 750,000 $487,500 $262,500 To Sch. E, pg.
Income 2
Charitable 50,000 32,500 17,500 To Sch. A
Contributions
S/T Capital (4,500) (2,925) (1,575) To Sch. D
Losses
L/T Capital 6,000 3,900 2,100 To Sch. D
Gains

Difficulty: 3 Hard
EA: Yes
43. Shirelle and Newman are each 50% partners of a business which operates as a
partnership. The business reports the following results:
Revenue $95,000
Investment expenses 8,000
Short-term capital gains 15,000
Short-term capital losses (22,000)
How do Shirelle and Newman report these items for tax purposes?
Answer:
Revenue $95,000
Expenses (48,000)
Ordinary Income $47,000
x 50%
Page 2 of Schedule E $23,500
Investment Expense $8,000

x 50%
Schedule A (limited to investment income) $4,000
Net Short-term capital loss $7,000

($15,000 - $22,000)
x 50%
Schedule D ($3,500)
The loss is netted against other short-term and long-term capital gains.

Education
Solutions Manual

Difficulty: 3 Hard
EA: Yes
Tax Return Problems
The solutions to the chapter tax return problems can be found on the online learning
center: www.mhhe.com/cruz2014.

Education
Another random document with
no related content on Scribd:
be doubtful. It is dies Sabbati, a term which can signify only the
seventh day. Here is the first instance of the term Christian Sabbath,
Sabbati Christiani, and it is expressly applied to the seventh day
observed by Christians.
The longer form of the reputed epistle of Ignatius to the
Magnesians was not written till after Origen’s time, but, though not
written by Ignatius, it is valuable for light which it sheds upon the
existing state of things at the time of its composition, and for marking
the progress which apostasy had made with respect to the Sabbath.
Here is its reference to the Sabbath and first day:—
“Let us therefore no longer keep the Sabbath after the

Jewish manner, and rejoice in days of idleness; for ‘he that
does not work, let him not eat.’ For say the [holy] oracles, ‘In
the sweat of thy face shalt thou eat thy bread.’ But let every
one of you keep the Sabbath after a spiritual manner,
rejoicing in meditation on the law, not in relaxation of the
body, admiring the workmanship of God, and not eating things
prepared the day before, nor using lukewarm drinks, and
walking within a prescribed space, nor finding delight in
dancing and plaudits which have no sense in them. And after
the observance of the Sabbath, let every friend of Christ keep
the Lord’s day as a festival, the resurrection day, the queen
and chief of all the days [of the week]. Looking forward to this,
the prophet declared, ‘To the end, for the eighth day,’ on
which our life both sprang up again, and the victory over
death was obtained in Christ.”[695]
This writer specifies the different things which made up the Jewish
observance of the Sabbath. They may be summed up under two
heads. 1. Strict abstinence from labor. 2. Dancing and carousal.
Now, in the light of what Origen has said, we can understand the
contrast which this writer draws between the Jewish and Christian
observance of the Sabbath. The error of the Jews in the first part of
this was that they contented themselves with mere bodily relaxation,
without raising their thoughts to God, the Creator, and this mere
idleness soon gave place to sensual folly.
The Christian, as Origen draws the contrast, refrains from labor on
the Sabbath that he may raise his heart in grateful worship. Or, as
this writer draws it, the Christian keeps the Sabbath in a spiritual
manner, rejoicing in meditation on the law; but to do thus, he must
hallow it in the manner which that law commands, that is, in the
observance of a sacred rest which commemorates the rest of the
Creator. The writer evidently believed in the observance of the
Sabbath as an act of obedience to that law on which they were to
meditate on that day. And the nature of the epistle indicates that it
was observed, at all events, in the country where it was written. But
mark the work of apostasy. The so-called Lord’s day for which the
writer could offer nothing better than an argument drawn from the
title of the sixth psalm (see its marginal reading) is exalted above the
Lord’s holy day, and made the queen of all days!
The Apostolical Constitutions, though not written in apostolic
times, were in existence as early as the third century, and were then
very generally believed to express the doctrine of the apostles. They
do therefore furnish important historical testimony to the practice of
the church at that time, and also indicate the great progress which
apostasy had made. Guericke speaks thus of them:—
“This is a collection of ecclesiastical statutes purporting to

be the work of the apostolic age, but in reality formed
gradually in the second, third, and fourth centuries, and is of
much value in reference to the history of polity, and Christian
archæology generally.”[696]
Mosheim says of them:—
“The matter of this work is unquestionably ancient; since

the manners and discipline of which it exhibits a view are
those which prevailed amongst the Christians of the second
and third centuries, especially those resident in Greece and
the oriental regions.”[697]
These Constitutions indicate that the Sabbath was extensively

observed in the third century. They also show the standing of the
Sunday festival in that century. After solemnly enjoining the sacred
observance of the ten commandments, they thus enforce the
Sabbath:—
“Consider the manifold workmanship of God, which

received its beginning through Christ. Thou shalt observe the
Sabbath, on account of Him who ceased from his work of
creation, but ceased not from his work of providence: it is a
rest for meditation of the law, not for idleness of the
hands.”[698]
This is sound Sabbatarian doctrine. To show how distinctly these

Constitutions recognize the decalogue as the foundation of Sabbatic
authority we quote the words next preceding the above, though we
have quoted them on another occasion:—
“Have before thine eyes the fear of God, and always

remember the ten commandments of God,—to love the one
and only Lord God with all thy strength; to give no heed to
idols, or any other beings, as being lifeless gods, or irrational
beings or dæmons.”[699]
But though these Constitutions thus recognize the authority of the

decalogue and the sacred obligation of the seventh day, they elevate
the Sunday festival in some respects to higher honor than the
Sabbath, though they claim for it no precept of the Scriptures. Thus
they say:—
“But keep the Sabbath, and the Lord’s day festival; because
the former is the memorial of the creation, and the latter of the
resurrection.”[700]
“For the Sabbath is the ceasing of the creation, the

completion of the world, the inquiry after laws, and the
grateful praise to God for the blessings he has bestowed
upon men. All which the Lord’s day excels, and shows the
Mediator himself, the Provider, the Law-giver, the Cause of
the resurrection, the First-born of the whole creation.”[701]
“So that the Lord’s day commands us to offer unto thee, O

Lord, thanksgiving for all. For this is the grace afforded by
thee, which, on account of its greatness, has obscured all
other blessings.”[702]
Tested by his own principles, the writer of these Constitutions was

far advanced in apostasy; for he held a festival, for which he claimed
no divine authority, more honorable than one which he
acknowledged to be ordained of God. There could be but one step
more in this course, and that would be to set aside the
commandment of God for the ordinance of man, and this step was
not very long afterward actually taken. One other point should be
noticed. It is said:—
“Let the slaves work five days; but on the Sabbath day and
the Lord’s day let them have leisure to go to church for
instruction in piety.”[703]
The question of the sinfulness of labor on either of these days is

not here taken into the account; for the reason assigned is that the
slaves may have leisure to attend public worship. But while these
Constitutions elsewhere forbid labor on the Sabbath on the authority
of the decalogue, they do not forbid it upon the first day of the week.
Take the following as an example:—
“O Lord Almighty, thou hast created the world by Christ,
and hast appointed the Sabbath in memory thereof, because
that on that day thou hast made us rest from our works, for
the meditation upon thy laws.”[704]
The Apostolical Constitutions are valuable to us, not as authority

respecting the teaching of the apostles, but as giving us a knowledge
of the views and practices which prevailed in the third century. As
these Constitutions were extensively regarded as embodying the
doctrine of the apostles, they furnish conclusive evidence that, at the
time when they were put in writing, the ten commandments were
very generally revered as the immutable rule of right, and that the
Sabbath of the Lord was by many observed as an act of obedience
to the fourth commandment, and as the divine memorial of the
creation. They also show that the first-day festival had, in the third
century, attained such strength and influence as to clearly indicate
that ere long it would claim the entire ground. But observe that the
Sabbath and the so-called Lord’s day were then regarded as distinct
institutions, and that no hint of the change of the Sabbath from the
seventh day to the first is even once given.
Thus much out of the fathers concerning the authority of the
decalogue, and concerning the perpetuity and observance of the
ancient Sabbath. The suppression of the Sabbath of the Bible, and
the elevation of Sunday to its place, has been shown to be in no
sense the work of the Saviour. But so great a work required the
united action of powerful causes, and these causes we now
enumerate.
1. Hatred toward the Jews. This people, who retained the ancient
Sabbath, had slain Christ. It was easy for men to forget that Christ,
as Lord of the Sabbath, had claimed it as his own institution, and to
call the Sabbath a Jewish institution which Christians should not
regard.[705]
2. The hatred of the church of Rome toward the Sabbath, and its
determination to elevate Sunday to the highest place. This church,
as the chief in the work of apostasy, took the lead in the earliest
effort to suppress the Sabbath by turning it into a fast. And the very
first act of papal aggression was by an edict in behalf of Sunday.
Thenceforward, in every possible form, this church continued this
work until the pope announced that he had received a divine
mandate for Sunday observance [the very thing lacking] in a roll
which fell from Heaven.
3. The voluntary observance of memorable days. In the Christian
church, almost from the beginning, men voluntarily honored the
fourth, the sixth, and the first days of the week, and also the
anniversary of the Passover and the Pentecost, to commemorate the
betrayal, the death, and the resurrection, of Christ, and the descent
of the Holy Spirit, which acts in themselves could not be counted
sinful.
4. The making of tradition of equal authority with the Scriptures.
This was the great error of the early church, and the one to which
that church was specially exposed, as having in it those who had
seen the apostles, or who had seen those who had seen them. It
was this which rendered the voluntary observance of memorable
days a dangerous thing. For what began as a voluntary observance
became, after the lapse of a few years, a standing custom,
established by tradition, which must be obeyed because it came
from those who had seen the apostles, or from those who had seen
others who had seen them. This is the origin of the various errors of
the great apostasy.
5. The entrance of the no-law heresy. This is seen in Justin Martyr,
the earliest witness to the Sunday festival, and in the church of
Rome of which he was then a member.
6. The extensive observance of Sunday as a heathen festival. The
first day of the week corresponded to the widely observed heathen
festival of the sun. It was therefore easy to unite the honor of Christ
in the observance of the day of his resurrection with the convenience
and worldly advantage of his people in having the same festival day
with their heathen neighbors, and to make it a special act of piety in
that the conversion of the heathen was thereby facilitated, while the
neglect of the ancient Sabbath was justified by stigmatizing that
divine memorial as a Jewish institution with which Christians should
have no concern.
CHAPTER XIX.
THE SABBATH AND FIRST-DAY DURING THE FIRST FIVE CENTURIES.
Origin of the Sabbath and of the festival of the sun contrasted—Entrance

of that festival into the church—The Moderns with the Ancients—The
Sabbath observed by the early Christians—Testimony of Morer—Of
Twisse—Of Giesler—Of Mosheim—Of Coleman—Of Bishop Taylor—
The Sabbath loses ground before the Sunday festival—Several
bodies of decided Sabbatarians—Testimony of Brerewood—
Constantine’s Sunday law—Sunday a day of labor with the primitive
church—Constantine’s edict a heathen law, and himself at that time a
heathen—The bishop of Rome authoritatively confers the name of
Lord’s day upon Sunday—Heylyn narrates the steps by which Sunday
arose to power—A marked change in the history of that institution—
Paganism brought into the church—The Sabbath weakened by
Constantine’s influence—Remarkable facts concerning Eusebius—
The Sabbath recovers strength again—The council of Laodicea
pronounces a curse upon the Sabbath-keepers—The progress of
apostasy marked—Authority of church councils considered—
Chrysostom—Jerome—Augustine—Sunday edicts—Testimony of
Socrates relative to the Sabbath about the middle of the fifth century
—Of Sozomen—Effectual suppression of the Sabbath at the close of
the fifth century.
The origin of the Sabbath and of the festival of Sunday is now
distinctly understood. When God made the world, he gave to man
the Sabbath that he might not forget the Creator of all things. When
men apostatized from God, Satan turned them to the worship of the
sun, and, as a standing memorial of their veneration for that
luminary, caused them to dedicate to his honor the first day of the
week. When the elements of apostasy had sufficiently matured in the
Christian church, this ancient festival stood forth as a rival to the
Sabbath of the Lord. The manner in which it obtained a foothold in
the Christian church has been already shown; and many facts which
have an important bearing upon the struggle between these rival
institutions have also been given. We have, in the preceding
chapters, given the statements of the most ancient Christian writers
respecting the Sabbath and first-day in the early church. As we now
trace the history of these two days during the first five centuries of
the Christian era, we shall give the statements of modern church
historians, covering the same ground with the early fathers, and shall
also quote in continuation of the ancient writers the testimonies of
the earliest church historians. The reader can thus discover how
nearly the ancients and moderns agree. Of the observance of the
Sabbath in the early church, Morer speaks thus:—
“The primitive Christians had a great veneration for the

Sabbath, and spent the day in devotion and sermons. And it is
not to be doubted but they derived this practice from the
apostles themselves, as appears by several scriptures to that
purpose; who, keeping both that day and the first of the week,
gave occasion to the succeeding ages to join them together,
and make it one festival, though there was not the same
reason for the continuance of the custom as there was to
begin it.”[706]
A learned English first-day writer of the seventeenth century,

William Twisse, D. D., thus states the early history of these two days:
—
“Yet for some hundred years in the primitive church, not the
Lord’s day only, but the seventh day also, was religiously
observed, not by Ebion and Cerinthus only, but by pious
Christians also, as Baronius writeth, and Gomarus
confesseth, and Rivet also, that we are bound in conscience
under the gospel, to allow for God’s service a better
proportion of time, than the Jews did under the law, rather
than a worse.”[707]
That the observance of the Sabbath was not confined to Jewish

converts, the learned Giesler explicitly testifies:—
“While the Jewish Christians of Palestine retained the entire
Mosaic law, and consequently the Jewish festivals, the
Gentile Christians observed also the Sabbath and the
passover,[708] with reference to the last scenes of Jesus’ life,
but without Jewish superstition. In addition to these, Sunday,
as the day of Christ’s resurrection, was devoted to religious
services.”[709]
The statement of Mosheim may be thought to contradict that of

Giesler. Thus he says:—
“The seventh day of the week was also observed as a

festival, not by the Christians in general, but by such churches
only as were principally composed of Jewish converts, nor did
the other Christians censure this custom as criminal and
unlawful.”[710]
It will be observed that Mosheim does not deny that the Jewish
converts observed the Sabbath. He denies that this was done by the
Gentile Christians. The proof on which he rests this denial is thus
stated by him:—
“The churches of Bithynia, of which Pliny speaks, in his

letter to Trajan, had only one stated day for the celebration of
public worship; and that was undoubtedly the first day of the
week, or what we call the Lord’s day.”[711]
The proposition to be proved is this: The Gentile Christians did not

observe the Sabbath. The proof is found in the following fact: The
churches of Bithynia assembled on a stated day for the celebration
of divine worship. It is seen therefore that the conclusion is
gratuitous, and wholly unauthorized by the testimony.[712] But this
instance shows the dexterity of Mosheim in drawing inferences, and
gives us some insight into the kind of evidence which supports some
of these sweeping statements in behalf of Sunday. Who can say that
this “stated day” was not the very day enjoined in the fourth
commandment? Of the Sabbath and first day in the early ages of the
church, Coleman speaks as follows:—
“The last day of the week was strictly kept in connection

with that of the first day, for a long time after the overthrow of
the temple and its worship. Down even to the fifth century the
observance of the Jewish Sabbath was continued in the
Christian church, but with a rigor and solemnity gradually
diminishing until it was wholly discontinued.”[713]
This is a most explicit acknowledgment that the Bible Sabbath was

long observed by the body of the Christian church. Coleman is a
first-day writer, and therefore not likely to state the case too strongly
in behalf of the seventh day. He is a modern writer, but we have
already proved his statements true out of the ancients. It is true that
Coleman speaks also of the first day of the week, yet his subsequent
language shows that it was a long while before this became a sacred
day. Thus he says:—
“During the early ages of the church it was never entitled

‘the Sabbath,’ this word being confined to the seventh day of
the week, the Jewish Sabbath, which, as we have already
said, continued to be observed for several centuries by the
converts to Christianity.”[714]
This fact is made still clearer by the following language, in which

this historian admits Sunday to be nothing but a human ordinance:—
“No law or precept appears to have been given by Christ or

the apostles, either for the abrogation of the Jewish Sabbath,
or the institution of the Lord’s day, or the substitution of the
first for the seventh day of the week.”[715]
Coleman does not seem to realize that in making this truthful
statement he has directly acknowledged that the ancient Sabbath is
still in full force as a divine institution, and that first-day observance
is only authorized by the traditions of men. He next relates the
manner in which this Sunday festival which had been nourished in
the bosom of the church usurped the place of the Lord’s Sabbath; a
warning to all Christians of the tendency of human institutions, if
cherished by the people of God, to destroy those which are divine.
Let this important language be carefully pondered. He speaks thus:
—
“The observance of the Lord’s day was ordered while yet

the Sabbath of the Jews was continued; nor was the latter
superseded until the former had acquired the same solemnity
and importance, which belonged, at first, to that great day
which God originally ordained and blessed.... But in time, after
the Lord’s day was fully established, the observance of the
Sabbath of the Jews was gradually discontinued, and was
finally denounced as heretical.”[716]
Thus is seen the result of cherishing this harmless Sunday festival

in the church. It only asked toleration at first; but gaining strength by
degrees, it gradually undermined the Sabbath of the Lord, and finally
denounced its observance as heretical.
Jeremy Taylor, a distinguished bishop of the Church of England,
and a man of great erudition, but a decided opponent of Sabbatic
obligation, confirms the testimony of Coleman. He affirms that the
Sabbath was observed by the Christians of the first three hundred
years, but denies that they did this out of respect to the authority or
the law of God. But we have shown from the fathers that those who
hallowed the Sabbath did it as an act of obedience to the fourth
commandment, and that the decalogue was acknowledged as of
perpetual obligation, and as the perfect rule of right. As Bishop T.
denies that this was their ground of observance, he should have
shown some other, which he has not done. Thus he says:—
“The Lord’s day did not succeed in the place of the
Sabbath, but the Sabbath was wholly abrogated, and the
Lord’s day was merely an ecclesiastical institution. It was not
introduced by virtue of the fourth commandment, because
they for almost three hundred years together kept that day
which was in that commandment; but they did it also without
any opinion of prime obligation, and therefore they did not
suppose it moral.”[717]
That such an opinion relative to the obligation of the fourth

commandment had gained ground extensively among the leaders of
the church, as early at least as the fourth century, and probably in
the third, is sufficiently attested by the action of the council of
Laodicea, a. d. 364, which anathematized those who should observe
the Sabbath, as will be noticed in its place. That this loose view of
the morality of the fourth commandment was resisted by many, is
shown by the existence of various bodies of steadfast Sabbatarians
in that age, whose memory has come down to us; and also by the
fact that that council made such a vigorous effort to put down the
Sabbath. Coleman has clearly portrayed the gradual depression of
the Sabbath, as the first-day festival arose in strength, until Sabbath-
keeping became heretical, when, by ecclesiastical authority, the
Sabbath was suppressed, and the festival of Sunday became fully
established as a new and different institution. The natural
consequence of this is seen in the rise of distinct sects, or bodies,
who were distinguished for their observance of the seventh day. That
they should be denounced as heretical and falsely charged with
many errors is not surprising, when we consider that their memory
has been handed down to us by their opponents, and that Sabbath-
keepers in our own time are not unfrequently treated in this very
manner. The first of these ancient Sabbatarian bodies was the
Nazarenes. Of these, Morer testifies that,
They “retained the Sabbath; and though they pretended to

believe as Christians, yet they practiced as Jews, and so
were in reality neither one nor the other.”[718]
And Dr. Francis White, lord bishop of Ely, mentions the Nazarenes
as one of the ancient bodies of Sabbath-keepers who were
condemned by the church leaders for that heresy; and he classes
them with heretics as Morer has done.[719] Yet the Nazarenes have
a peculiar claim to our regard, as being in reality the apostolic church
of Jerusalem, and its direct successors. Thus Gibbon testifies:—
“The Jewish converts, or, as they were afterwards called,

the Nazarenes, who had laid the foundations of the church,
soon found themselves overwhelmed by the increasing
multitudes, that from all the various religions of polytheism
enlisted under the banner of Christ.... The Nazarenes retired
from the ruins of Jerusalem to the little town of Pella beyond
the Jordan, where that ancient church languished above sixty
years in solitude and obscurity.”[720]
It is not strange that that church which fled out of Judea at the
word of Christ[721] should long retain the Sabbath, as it appears that
they did, even as late as the fourth century. Morer mentions another
class of Sabbath-keepers in the following language:—
“About the same time were the Hypsistarii who closed with
these as to what concerned the Sabbath, yet would by no
means accept circumcision as too plain a testimony of ancient
bondage. All these were heretics, and so adjudged to be by
the Catholic church. Yet their hypocrisy and industry were
such as gained them a considerable footing in the Christian
world.”[722]
The bishop of Ely names these also as a body of Sabbath-keepers

whose heresy was condemned by the church.[723] The learned
Joseph Bingham, M. A., gives the following account of them:—
“There was another sect which called themselves

Hypsistarians, that is, worshipers of the most high God, whom
they worshiped as the Jews only in one person. And they
observed their Sabbaths and used distinction of meats, clean
and unclean, though they did not regard circumcision, as
Gregory Nazianzen, whose father was once one of this sect,
gives the account of them.”[724]
It must ever be remembered that these people, whom the Catholic

church adjudged to be heretics, are not speaking for themselves:
their enemies who condemned them have transmitted to posterity all
that is known of their history. It would be well if heretics, who meet
with little mercy at the hand of ecclesiastical writers, could at least
secure the impartial justice of a truthful record.
Another class are thus described by Cox in his elaborate work
entitled “Sabbath Laws and Sabbath Duties”:—
“In this way [that is, by presenting the testimony of the Bible
on the subject] arose the ancient Sabbatarians, a body it is
well known of very considerable importance in respect both to
numbers and influence, during the greater part of the third
and the early part of the next century.”[725]
The close of the third century witnessed the Sabbath much

weakened in its hold upon the church in general, and the festival of
Sunday, although possessed of no divine authority, steadily gaining
in strength and in sacredness. The following historical testimony
from a member of the English Church, Edward Brerewood, professor
in Gresham College, London, gives a good general view of the
matter, though the author’s anti-Sabbatarian views are mixed with it.
He says:—
“The ancient Sabbath did remain and was observed

together with the celebration of the Lord’s day by the
Christians of the east church above three hundred years after
our Saviour’s death; and besides that, no other day for more
hundreds of years than I spake of before, was known in the
church by the name of Sabbath but that: let the collection
thereof and conclusion of all be this: The Sabbath of the
seventh day as touching the allegations of God’s solemn
worship to time was ceremonial; that Sabbath was religiously
observed in the east church three hundred years and more
after our Saviour’s passion. That church being the great part
of Christendom, and having the apostles’ doctrine and
example to instruct them, would have restrained it if it had
been deadly.”[726]
Such was the case in the eastern churches at the end of the third
century; but in such of the western churches as sympathized with the
church of Rome, the Sabbath had been treated as a fast from the
beginning of that century, to express their opposition toward those
who observed it according to the commandment.
In the early part of the fourth century occurred an event which
could not have been foreseen, but which threw an immense weight
in favor of Sunday into the balances already trembling between the
rival institutions, the Sabbath of the Lord and the festival of the sun.
This was nothing less than an edict from the throne of the Roman
Empire in behalf of “the venerable day of the sun.” It was issued by
the emperor Constantine in a. d. 321, and is thus expressed:—
“Let all the judges and town people, and the occupation of
all trades rest on the venerable day of the sun; but let those
who are situated in the country, freely and at full liberty attend
to the business of agriculture; because it often happens that
no other day is so fit for sowing corn and planting vines; lest,
the critical moment being let slip, men should lose the
commodities granted by Heaven. Given the seventh day of
March; Crispus and Constantine being consuls, each of them
for the second time.”[727]
Of this law, a high authority thus speaks:—

“It was Constantine the Great who first made a law for the
proper observance of Sunday; and who, according to
Eusebius, appointed it should be regularly celebrated
throughout the Roman Empire. Before him, and even in his
time, they observed the Jewish Sabbath, as well as Sunday;
both to satisfy the law of Moses, and to imitate the apostles
who used to meet together on the first day. By Constantine’s
law, promulgated in 321, it was decreed that for the future the
Sunday should be kept as a day of rest in all cities and towns;
but he allowed the country people to follow their work.”[728]
Another eminent authority thus states the purport of this law:—
“Constantine the Great made a law for the whole empire (a.
d. 321) that Sunday should be kept as a day of rest in all
cities and towns; but he allowed the country people to follow
their work on that day.”[729]
Thus the fact is placed beyond all dispute that this decree gave full
permission to all kinds of agricultural labor. The following testimony
of Mosheim is therefore worthy of strict attention:—
“The first day of the week, which was the ordinary and
stated time for the public assemblies of the Christians, was in
consequence of a peculiar law enacted by Constantine,
observed with greater solemnity than it had formerly
been.”[730]
What will the advocates of first-day sacredness say to this? They

quote Mosheim respecting Sunday observance in the first century—
which testimony has been carefully examined in this work[731]—and
they seem to think that his language in support of first-day
sacredness is nearly equal in authority to the language of the New
Testament; in fact, they regard it as supplying an important omission
in that book. Yet Mosheim states respecting Constantine’s Sunday
law, promulgated in the fourth century, which restrained merchants
and mechanics, but allowed all kinds of agricultural labor on that day,
that it caused the day to be “observed with greater solemnity than it
had formerly been.” It follows, therefore, on Mosheim’s own showing,
that Sunday, during the first three centuries, was not a day of
abstinence from labor in the Christian church. On this point, Bishop
Taylor thus testifies:—
“The primitive Christians did all manner of works upon the

Lord’s day, even in the times of persecution, when they are
the strictest observers of all the divine commandments; but in
this they knew there was none; and therefore when
Constantine the emperor had made an edict against working
upon the Lord’s day, yet he excepts and still permitted all
agriculture or labors of the husbandman whatsoever.”[732]
Morer tells us respecting the first three centuries, that is to say, the
period before Constantine, that
“The Lord’s day had no command that it should be

sanctified, but it was left to God’s people to pitch on this or
that day for the public worship. And being taken up and made
a day of meeting for religious exercises, yet for three hundred
years there was no law to bind them to it, and for want of such
a law, the day was not wholly kept in abstaining from common
business; nor did they any longer rest from their ordinary
affairs (such was the necessity of those times) than during the
divine service.”[733]
And Sir Wm. Domville says:—
“Centuries of the Christian era passed away before the

Sunday was observed by the Christian church as a Sabbath.
History does not furnish us with a single proof or indication
that it was at any time so observed previous to the Sabbatical
edict of Constantine in a. d. 321.”[734]
What these able modern writers set forth as to labor on Sunday

before the edict of Constantine was promulgated, we have fully
proved in the preceding chapters out of the most ancient
ecclesiastical writers. That such an edict could not fail to strengthen
the current already strongly set in favor of Sunday, and greatly to
weaken the influence of the Sabbath, cannot be doubted. Of this
fact, an able writer bears witness:—
“Very shortly after the period when Constantine issued his

edict enjoining the general observance of Sunday throughout
the Roman Empire, the party that had contended for the
observance of the seventh day dwindled into insignificance.
The observance of Sunday as a public festival, during which
all business, with the exception of rural employments, was
intermitted, came to be more and more generally established
ever after this time, throughout both the Greek and the Latin
churches. There is no evidence however that either at this, or
at a period much later, the observance was viewed as
deriving any obligation from the fourth commandment; it
seems to have been regarded as an institution corresponding
in nature with Christmas, Good Friday, and other festivals of
the church; and as resting with them on the ground of
ecclesiastical authority and tradition.”[735]
This extraordinary edict of Constantine caused Sunday to be

observed with greater solemnity than it had formerly been. Yet we
have the most indubitable proof that this law was a heathen
enactment; that it was put forth in favor of Sunday as a heathen
institution and not as a Christian festival; and that Constantine
himself not only did not possess the character of a Christian, but was
at that time in truth a heathen. It is to be observed that Constantine
did not designate the day which he commanded men to keep, as
Lord’s day, Christian Sabbath, or the day of Christ’s resurrection; nor
does he assign any reason for its observance which would indicate it
as a Christian festival. On the contrary, he designates the ancient
heathen festival of the sun in language that cannot be mistaken. Dr.
Hessey thus sustains this statement:—
“Others have looked at the transaction in a totally different

light, and refused to discover in the document, or to suppose
in the mind of the enactor, any recognition of the Lord’s day
as a matter of divine obligation. They remark, and very truly,
that Constantine designates it by its astrological or heathen
title, Dies Solis, and insist that the epithet venerabilis with
which it is introduced has reference to the rites performed on
that day in honor of Hercules, Apollo, and Mithras.”[736]
On this important point, Milman, the learned editor of Gibbon, thus

testifies:—
“The rescript commanding the celebration of the Christian

Sabbath, bears no allusion to its peculiar sanctity as a
Christian institution. It is the day of the sun which is to be
observed by the general veneration; the courts were to be
closed, and the noise and tumult of public business and legal
litigation were no longer to violate the repose of the sacred
day. But the believer in the new paganism, of which the solar
worship was the characteristic, might acquiesce without
scruple in the sanctity of the first day of the week.”[737]
And he adds in a subsequent chapter:—
“In fact, as we have before observed, the day of the sun

would be willingly hallowed by almost all the pagan world,
especially that part which had admitted any tendency towards
the Oriental theology.”[738]

Fundamentals of Taxation 2015 8th Edition Cruz Solutions Manual instant download all chapter

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Fundamentals of Taxation 2015 8th Edition Cruz Solutions Manual instant download all chapter

Uploaded by

Copyright:

Available Formats

Fundamentals of Taxation 2015 8th

Edition Cruz Solutions Manual

Fundamentals of Taxation 2015 8th Edition Cruz Test

Fundamentals of Taxation 2014 7th Edition Cruz

Fundamentals of Taxation 2019 Edition 12th Edition Cruz

Fundamentals of Taxation 2016 Edition 9th Edition Cruz

Fundamentals of Taxation 2014 7th Edition Cruz Test

Fundamentals of Taxation 2016 Edition 9th Edition Cruz

Fundamentals of Taxation 2018 Edition 11th Edition Cruz

Fundamentals of Taxation 2017 Edition 10th Edition Cruz

Cruz et al. Fundamentals of Taxation 2015 8-1 © 2015 McGraw-Hill Education

4. When depreciation is deducted on a rental property, why is it beneficial for the

Cruz et al. Fundamentals of Taxation 2015 8-2 © 2015 McGraw-Hill Education

Cruz et al. Fundamentals of Taxation 2015 8-3 © 2015 McGraw-Hill Education

9. What is considered personal use of a vacation rental property?

Cruz et al. Fundamentals of Taxation 2015 8-4 © 2015 McGraw-Hill Education

Cruz et al. Fundamentals of Taxation 2015 8-5 © 2015 McGraw-Hill Education

Cruz et al. Fundamentals of Taxation 2015 8-6 © 2015 McGraw-Hill Education

Learning Objective: 08-04

Cruz et al. Fundamentals of Taxation 2015 8-7 © 2015 McGraw-Hill Education

Cruz et al. Fundamentals of Taxation 2015 8-8 © 2015 McGraw-Hill Education

Cruz et al. Fundamentals of Taxation 2015 8-9 © 2015 McGraw-Hill Education

Cruz et al. Fundamentals of Taxation 2015 8-10 © 2015 McGraw-Hill

24. Which of the following items is not deductible as rental expense?

Cruz et al. Fundamentals of Taxation 2015 8-11 © 2015 McGraw-Hill

Cruz et al. Fundamentals of Taxation 2015 8-12 © 2015 McGraw-Hill

Gross rental income $9,500

Cruz et al. Fundamentals of Taxation 2015 8-13 © 2015 McGraw-Hill

Cruz et al. Fundamentals of Taxation 2015 8-14 © 2015 McGraw-Hill

31. Which of the following entity (ies) is (are) considered flow-through?

Cruz et al. Fundamentals of Taxation 2015 8-15 © 2015 McGraw-Hill

Mortgage interest $7,500

Personal Schedule A Schedule E

Cruz et al. Fundamentals of Taxation 2015 8-16 © 2015 McGraw-Hill

Insurance 900 N/D (900)

Learning Objective: 08-01

Cruz et al. Fundamentals of Taxation 2015 8-17 © 2015 McGraw-Hill

Rental income $15,000

Learning Objective: 08-02

Cruz et al. Fundamentals of Taxation 2015 8-18 © 2015 McGraw-Hill

Real property taxes $4,500

Cruz et al. Fundamentals of Taxation 2015 8-19 © 2015 McGraw-Hill

Mortgage interest $4,200

a. The proper tax treatment is to allocate the expenses between personal

Learning Objective: 08-02

Cruz et al. Fundamentals of Taxation 2015 8-20 © 2015 McGraw-Hill

Topic: Personal Use of Rental Property

Mortgage interest $1,300

Case Rental Income Days Rented Personal Use Days

Cruz et al. Fundamentals of Taxation 2015 8-21 © 2015 McGraw-Hill

Learning Objective: 08-02

Mortgage interest $4,500

Tax Court – Schedule E Personal

IRS Method – Schedule E Personal

Cruz et al. Fundamentals of Taxation 2015 8-22 © 2015 McGraw-Hill

Investment Expense $150,000

Cruz et al. Fundamentals of Taxation 2015 8-23 © 2015 McGraw-Hill

Net short-term capital loss ($56,000)

Learning Objective: 08-04

Interest and dividends of $20,000 are reported as interest and dividends

Total Dominique Terrell

Cruz et al. Fundamentals of Taxation 2015 8-24 © 2015 McGraw-Hill

Learning Objective: 08-04

Investment Expense $8,000