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 2017 Edition

Taxation of Individuals
McGraw-Hill’s

Spilker • AyerS • BArrick • OutSlAy • rOBinSOn • WeAver • WOrShAm

 McGraw–Hill’s

Taxation of Individuals
 McGraw–Hill’s

Taxation of Individuals

Brian C. Spilker
Brigham Young University
Editor

Benjamin C. Ayers John A. Barrick

The University of Georgia
Edmund Outslay
Michigan State University
Connie D. Weaver
Texas A&M University
Brigham Young University
John R. Robinson
Texas A&M University
Ron G. Worsham
Brigham Young University
McGRAW-HILL’S TAXATION OF INDIVIDUALS, 2017 EDITION, EIGHTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2017 by McGraw-Hill Education. All rights
reserved. Printed in the United States of America. Previous editions © 2016, 2015, and 2014. No part of this publication may be
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of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for
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Some ancillaries, including electronic and print components, may not be available to customers outside the United States.
This book is printed on acid-free paper.
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Dedications
We dedicate this book to:
My children, Braxton, Cameron, Ethan, and Lauren, and to my parents, Ray and Janet. Last but not least, to my
wife, Kim, for allowing me to take up valuable kitchen space while I was working on the project. I love you all.
Brian Spilker
My wife, Marilyn, daughters Margaret Lindley and Georgia, son Benjamin, and parents Bill and Linda.
Ben Ayers
My wife, Jill, and my children Annika, Corinne, Lina, Mitch, and Connor.
John Barrick
My family, Jane, Mark, Sarah, Chloe, Lily, and Jeff, and to Professor James E. Wheeler, my mentor and friend.
Ed Outslay
JES, Tommy, and Laura.
John Robinson
My family, Dan, Travis, Alix, and Alan.
Connie Weaver
My wife, Anne, sons Matthew and Daniel, and daughters Whitney and Hayley.
Ron Worsham
 About the Authors

Brian Spilker (PhD, University of Texas at Austin, 1993) is the Robert Call/Deloitte Pro-
fessor in the School of Accountancy at Brigham Young University. He teaches taxation
in the graduate and undergraduate programs at Brigham Young University. He received
both BS (Summa Cum Laude) and MAcc (tax emphasis) degrees from Brigham Young
University before working as a tax consultant for Arthur Young & Co. (now Ernst &
Young). After his professional work experience, Brian earned his PhD at the University
of Texas at Austin. In 1996, he was selected as one of two nationwide recipients of the
Price Waterhouse Fellowship in Tax Award. In 1998, he was a winner of the American
Taxation Association and Arthur Andersen Teaching Innovation Award for his work in
the classroom; he has also been awarded for his use of technology in the classroom at
Brigham Young University. Brian researches issues relating to tax information search
and professional tax judgment. His research has been published in journals such as The
Accounting Review, Organizational Behavior and Human Decision Processes, Journal of
the American Taxation Association, Behavioral Research in Accounting, Journal of Ac-
counting Education, Journal of Corporate Taxation, and Journal of Accountancy.

Ben Ayers (PhD, University of Texas at Austin, 1996) holds the Earl Davis Chair in Taxa-
tion and is the dean of the Terry College of Business at the University of Georgia. He
received a PhD from the University of Texas at Austin and an MTA and BS from the
University of Alabama. Prior to entering the PhD program at the University of Texas,
Ben was a tax manager at KPMG in Tampa, Florida, and a contract manager with Com-
plete Health, Inc., in Birmingham, Alabama.

Ben teaches tax planning and research courses in the undergraduate and graduate pro-
grams at the University of Georgia. He is the recipient of 11 teaching awards at the school,
college, and university levels, including the Richard B. Russell Undergraduate Teaching
Award, the highest teaching honor for University of Georgia junior faculty members. His
research interests include the effects of taxation on firm structure, mergers and acquisi-
tions, and capital markets and the effects of accounting information on security returns. He
has published articles in journals such as the Accounting Review, Journal of Finance, Jour-
nal of Accounting and Economics, Contemporary Accounting Research, Review of Account-
ing Studies, Journal of Law and Economics, Journal of the American Taxation Association,
and National Tax Journal. Ben was the 1997 recipient of the American Accounting Asso-
ciation’s Competitive Manuscript Award and the 2003 and 2008 recipient of the American
Taxation Association’s Outstanding Manuscript Award.

v
vi About the Authors

John Barrick (PhD, University of Nebraska at Lincoln, 1998) is currently an associate

professor in the Marriott School at Brigham Young University. He served as an accoun-
tant at the United States Congress Joint Committee on Taxation for the 110th and 111th
Congresses. He teaches taxation in the graduate and undergraduate programs at Brigham
Young University. He received both BS and MAcc (tax emphasis) degrees from Brigham
Young University before working as a tax consultant for Price Waterhouse (now Pricewa-
terhouseCoopers). After his professional work experience, John earned his PhD at the
University of Nebraska at Lincoln. He was the 1998 recipient of the American Account-
ing Association, Accounting, Behavior, and Organization Section’s Outstanding Disser-
tation Award. John researches issues relating to professional tax judgment and tax
information search. His research has been published in journals such as Organizational
Behavior and Human Decision Processes, Contemporary Accounting Research, and Jour-
nal of the American Taxation Association.

Ed Outslay (PhD, University of Michigan, 1981) is a professor of accounting and the

Deloitte/Michael Licata Endowed Professor of Taxation in the Department of Account-
ing and Information Systems at Michigan State University, where he has taught since
1981. He received a BA from Furman University in 1974 and an MBA and PhD from the
University of Michigan in 1977 and 1981. Ed currently teaches graduate classes in corpo-
rate taxation, multiunit enterprises, accounting for income taxes, and international taxa-
tion. In February 2003, Ed testified before the Senate Finance Committee on the Joint
Committee on Taxation’s Report on Enron Corporation. MSU has honored Ed with the
Presidential Award for Outstanding Community Service, Distinguished Faculty Award,
John D. Withrow Teacher-Scholar Award, Roland H. Salmonson Outstanding Teaching
Award, Senior Class Council Distinguished Faculty Award, MSU Teacher-Scholar
Award, and MSU’s 1st Annual Curricular Service-Learning and Civic Engagement
Award in 2008. Ed received the Ray M. Sommerfeld Outstanding Tax Educator Award in
2004 and the lifetime Service Award in 2013 from the American Taxation Association.
He has also received the ATA Outstanding Manuscript Award twice, the ATA/Deloitte
Teaching Innovations Award, and the 2004 Distinguished Achievement in Accounting
Education Award from the Michigan Association of CPAs. Ed has been recognized for
his community service by the Greater Lansing Chapter of the Association of Govern-
ment Accountants, the City of East Lansing (Crystal Award), and the East Lansing Edu-
cation Foundation. He received a National Assistant Coach of the Year Award in 2003
from AFLAC and was named an Assistant High School Baseball Coach of the Year in
2002 by the Michigan High School Baseball Coaches Association.
 About the Authors vii

John Robinson (PhD, University of Michigan, 1981) is the Patricia ‘77 and Grant E. Sims
‘77 Eminent Scholar Chair in Business. Prior to joining the faculty at Texas A&M, John
was the C. Aubrey Smith Professor of Accounting at the University of Texas at Austin,
Texas, and he taught at The University of Kansas where he was The Arthur Young Fac-
ulty Scholar. In 2009-2010 John served as the Academic Fellow in the Division of Corpo-
ration Finance at the Securities and Exchange Commission. He is the recipient of the
Henry A. Bubb Award for outstanding teaching, the Texas Blazer’s Faculty Excellence
Award, and the MPA Council Outstanding Professor Award. John also received the 2012
Outstanding Service Award from the American Taxation Association (ATA). John served
as the 2014-2015 -President (elect) of the ATA and is the ATA’s president for 2015-2016.
John conducts research in a broad variety of topics involving financial accounting, mergers
and acquisitions, and the influence of taxes on financial structures and performance. His
scholarly articles have appeared in The Accounting Review, The Journal of Accounting
and Economics, Journal of Finance, National Tax Journal, Journal of Law and Economics,
Journal of the American Taxation Association, The Journal of the American Bar Associa-
tion, and The Journal of Taxation. John’s research was honored with the 2003 and 2008
ATA Outstanding Manuscript Awards. In addition, John was the editor of The Journal
of the American Taxation Association from 2002 through 2005. Professor Robinson
­received his J.D. (Cum Laude) from The University of Michigan in 1979, and he earned a
PhD in accounting from The University of Michigan in 1981. John teaches courses on
individual and corporate taxation and advanced accounting.

Connie Weaver Connie Weaver (PhD, Arizona State University, 1997) is the KPMG Pro-
fessor of Accounting at Texas A&M University. She received a PhD from Arizona State
University, an MPA from the University of Texas at Arlington, and a BS (chemical engi-
neering) from the University of Texas at Austin. Prior to entering the PhD Program,
Connie was a tax manager at Ernst & Young in Dallas, Texas, where she became licensed
to practice as a CPA. She teaches taxation in the graduate and undergraduate programs
at Texas A&M University. She has also taught undergraduate and graduate students at
the University of Wisconsin-Madison and the University of Texas at Austin. She is the
recipient of several teaching awards including the 2006 American Taxation Association/
Deloitte Teaching Innovations, the David and Denise Baggett Teaching, and Association
of Former Students Distinguished Achievement awards recognizing innovation in teach-
ing taxation. Connie’s current research interests include the effects of tax and financial
incentives on corporate decisions and reporting. She has published articles in journals
such as the Accounting Review, Contemporary Accounting Research, Journal of the Ameri-
can Taxation Association, Accounting Horizons, Journal of Corporate Finance, and Tax
Notes. She serves on the editorial board of Contemporary Accounting Research and
­Issues in Accounting Education and was the 1998 recipient of the American Taxation
Association/Price Waterhouse Outstanding Dissertation award.

Ron Worsham (PhD, University of Florida, 1994) is an associate professor in the School
of Accountancy at Brigham Young University. He teaches taxation in the graduate, un-
dergraduate, MBA, and Executive MBA programs at Brigham Young University. He has
also taught as a visiting professor at the University of Chicago. He received both BS and
MAcc (tax emphasis) degrees from Brigham Young University before working as a tax
consultant for Arthur Young & Co. (now Ernst & Young) in Dallas, Texas. While in
Texas, he became licensed to practice as a CPA. After his professional work experience,
Ron earned his PhD at the University of Florida. He has been honored for outstanding
innovation in the classroom at Brigham Young University. Ron has published academic
research in the areas of taxpayer compliance and professional tax judgment. He has also
published legal research in a variety of areas. His work has been published in journals
such as Journal of the American Taxation Association, The Journal of International Taxa-
tion, The Tax Executive, Journal of Accountancy, and Practical Tax Strategies.
TEACHING THE CODE IN CONTEXT

The basic approach to teaching taxation hasn’t changed in decades. Today’s

student deserves a new approach. McGraw-Hill’s Taxation of Individuals
and Business Entities is a bold and innovative series that has been adopted
by over 300 schools across the country.
McGraw-Hill’s Taxation is designed to pro-
“This is the best tax book on the market. It’s
vide a unique, innovative, and engaging
very readable, student-friendly, and provides
learning experience for students studying tax-
great supplements.”
ation. The breadth of the topical coverage,
the storyline approach to presenting the mate- – Ann Esarco,
rial, the emphasis on the tax and nontax con- McHenry County College
sequences of multiple parties involved in
transactions, and the integration of financial
and tax accounting topics make this book
ideal for the modern tax curriculum.

Since the first manuscript was written in

“A lot of thought and planning went into the
2005, 400 professors have contributed 441
structure and content of the text, and a great
product was achieved. One of the most unique
book reviews, in addition to 23 focus groups
and helpful features is the common storyline and symposia. Throughout this preface, their
throughout each chapter.” comments on the book’s organization, peda-
gogy, and unique features are a testament
– Raymond J. Shaffer,
to the market-driven nature of Taxation’s
Youngstown State University
­development.

“The Spilker text, in many ways, is a more logical approach than any other tax textbook. The text
makes great use of the latest learning technologies through Connect and LearnSmart.”
– Ray Rodriguez, Southern Illinois University–Carbondale

viii
A MODERN APPROACH FOR
TODAY’S STUDENT
“This text provides a new approach to the teaching of the technical material. The style of the text
material is easier to read and understand. The examples and storyline are interesting and informa-
tive. The arrangement makes more sense in the understanding of related topics.”
– Robert Bertucelli, Long Island University–Post

Spilker’s taxation series was built around the following five core precepts:

1 Storyline Approach: Each chapter begins with a storyline that introduces a set of characters
or a business entity facing specific tax-related situations. Each chapter’s examples are related
to the storyline, providing students with opportunities to learn the code in context.

2 Conversational Writing Style: The authors took special care to write McGraw-Hill’s Taxa-
tion that fosters a friendly dialogue between the content and each individual student.
The tone of the presentation is intentionally conversational—creating the impression of
speaking with the student, as opposed to lecturing to the student.

3 Superior Organization of Related Topics:

McGraw-Hill’s Taxation takes a fresh “I believe it breaks down complex topics in a
way that’s easy to understand. Definitely easier
approach to taxation by providing two
than other tax textbooks that I’ve had experi-
alternative topic sequences. In the
ence with.”
­McGraw-Hill’s Taxation of Individuals
and Business Entities, topics are grouped – Jacob Gatlin, Athens State University
in theme chapters, including separate
chapters on home ownership, compensation, investments, and retirement savings and
deferred compensation. However, in the Essentials of Federal Taxation, topics follow a
more traditional sequence with topics presented in a life-cycle approach.

4 Real-World Focus: Students learn best when they see how concepts are applied in the real
world. For that reason, real-world examples and articles are included in “Taxes in the
Real World” boxes throughout the book. These vignettes demonstrate current issues in
taxation and show the relevance of tax issues in all areas of business.

5 Integrated Examples: The examples used

“Excellent text; love the story line approach
throughout the chapter relate directly to
and integrated examples. It’s easy to read and
the storyline presented at the beginning
understand explanations. The language of the
of each chapter, so students become famil- text is very clear and straightforward.”
iar with one set of facts and learn how to
apply those facts to different scenarios. – Sandra Owen, Indiana University–Bloomington
In addition to providing in-context
­examples, we provide “What if” scenarios within many examples to illustrate how varia-
tions in the facts might or might not change the answers.

ix
 ©Hero Images/Getty Images
®

Required=Results

McGraw-Hill Connect®
Learn Without Limits
Connect is a teaching and learning platform
that is proven to deliver better results for
students and instructors.
Connect empowers students by continually
adapting to deliver precisely what they need,
when they need it, and how they need it,
so your class time is more engaging and
effective.

Using Connect improves passing rates

by 10.8% and retention by 16.4%.
88% of instructors who use Connect
require it; instructor satisfaction increases
by 38% when Connect is required.

Analytics
Connect Insight®
Connect Insight is Connect’s new one-of-a-kind
visual analytics dashboard that provides at-a-
glance information regarding student performance,
which is immediately actionable. By presenting assignment,
assessment, and topical performance results together with
a time metric that is easily visible for aggregate or individual
results, Connect Insight gives the user the ability to take a
just-in-time approach to teaching and learning, which was
never before available. Connect Insight presents data that helps
instructors improve class performance in a way that is efficient
and effective.
Adaptive
THE FIRST AND ONLY
ADAPTIVE READING
EXPERIENCE DESIGNED
TO TRANSFORM THE
©Getty Images/iStockphoto WAY STUDENTS READ

More students earn A’s and

B’s when they use McGraw-Hill
Education Adaptive products.

SmartBook®
Proven to help students improve grades and
study more efficiently, SmartBook contains the
same content within the print book, but actively
tailors that content to the needs of the individual.
SmartBook’s adaptive technology provides
precise, personalized instruction on what the
student should do next, guiding the student to
master and remember key concepts, targeting
gaps in knowledge and offering customized
feedback, and driving the student toward
comprehension and retention of the subject
matter. Available on smartphones and tablets,
SmartBook puts learning at the student’s
fingertips—anywhere, anytime.

Over 4 billion questions have been

answered, making McGraw-Hill
Education products more intelligent,
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www.learnsmartadvantage.com
ONLINE ASSIGNMENTS
Connect helps students learn more effi-
ciently by providing feedback and prac-
tice material when they need it, where
they need it. Connect grades homework
automatically and gives immediate feed-
back on any questions students may
have missed. The extensive assignable,
gradable end-of-chapter content includes
a general journal application that looks
and feels more like what you would find
in a general ledger software package.
Also, select questions have been rede-
signed to test students’ knowledge more
fully. They now include tables for students to work through rather than requiring that all calcu-
lations be done offline.

End-of-chapter questions in Connect include:

• Discussion Questions
• Problems
• Comprehensive Problems (Available in the Tax Form Simulation!)

NEW! Tax Form Simulation

New auto-graded Tax Form Simulation provides a much-improved student experience when
solving the tax-form based problems. The tax form simulation allows students to apply tax con-
cepts by completing the actual tax forms online with automatic feedback and grading for both
students and instructors.

xii
NEW! Guided Examples
The Guided Examples in Connect provide a narrated, animated, step-by-step walk-through of
select problems similar to those assigned. These short presentations can be turned on or off by
instructors and provide reinforcement when students need it most.

McGraw-Hill Customer Experience Group Contact Information

At McGraw-Hill, we understand that getting the most from new technology can be challenging.
That’s why our services don’t stop after you purchase our products. You can contact our Prod-
uct Specialists 24 hours a day to get product training online. Or you can search the knowledge
bank of Frequently Asked Questions on our support website. For Customer Support, call
800-331-5094, or visit www.mhhe.com/support. One of our Technical Support Analysts will be
able to assist you in a timely fashion.
TaxACT®
McGraw-Hill’s Taxation can be packaged with tax software from TaxACT, one
of the leading preparation software companies in the market today. The 2016 edi-
tion includes availability of both Individuals and Business Entities software, including the 1040
forms and TaxACT Preparer’s Business 3-Pack (with Forms 1065, 1120, and 1120S).

xiii
A STORYLINE APPROACH THAT WILL
RESONATE WITH STUDENTS
Each chapter begins with a storyline
that introduces a set of characters fac-
Storyline Summary
Taxpayers: Courtney Wilson, age 40,
ing specific tax-related situations. This
Courtney’s mother Dorothy “Gram”
Weiss, age 70 revolutionary approach to teaching tax
Family
description:
Courtney is divorced with a son, Deron,
age 10, and a daughter, Ellen, age 20.
Gram is currently residing with Courtney.
emphasizes real people facing real tax
Location: Kansas City, Missouri dilemmas. Students learn to apply prac-
tical tax information to specific busi-
© Image Source Employment Courtney works as an architect for EWD.
status: Gram is retired.

C
Filing status: Courtney is head of household. Gram is

ness and personal situations. The

ourtney has already determined
her taxable income. Now she’s
Current
working on computing her tax
liability. She knows she owes a significant
situation:
amount of regular income tax on her
single.
Courtney and Gram have computed their
taxable income. Now they are trying to
determine their tax liability, tax refund
or additional taxes due, and whether
characters are brought further to life.
they owe any payment-related penalties.

employment and business activities.

However, she’s not sure how to compute the tax
on the qualified dividends she received from
General Electric. Courtney is worried that she
may be subject to the alternative minimum tax
this year because she’s heard that an increasing
number of taxpayers in her income range must
pay the tax. Finally, Courtney knows she owes
some self-employment taxes on her business income.
Courtney would like to determine whether she is
eligible to claim any tax credits such as the child
tax credit for her two children and education credits
because she paid for a portion of her daughter
Ellen’s tuition at the University of Missouri–Kansas
City this year. Courtney is hoping that she has
Examples
Examples are the cornerstone of
any textbook covering taxation.
For this reason, McGraw-Hill’s
paid enough in taxes during the year to avoid
underpayment penalties. She’s planning on filing
her tax return and paying her taxes on time.
Gram’s tax situation is much more straight-
forward. She needs to determine the regular in-
come tax on her taxable income. Her income is so
low she knows she need not worry about the alter- “The text provides very useful tools that
native minimum tax, and she believes she doesn’t
owe any self-employment tax. Gram didn’t prepay
students can read and understand, mak-
any taxes this year, so she is concerned that she
might be required to pay an underpayment penalty.
ing it easier to break the myth that ‘tax is
She also expects to file her tax return and pay her hard.’”
taxes by the looming due date.
to be continued . . .
– Daniel Hoops, Walsh College
“I absolutely love this textbook. This
textbook makes my job of teaching so
much easier.”
8-1

Taxation authors took special 2-4 CHAPTER 2

– Chuck Pier, Angelo State University
Tax Compliance, the IRS, and Tax Authorities

care to create clear and helpful

spi4866x_ch08_000-055.indd 1
The statute of limitations for IRS assessment can be extended in certain circum-
1/22/16 2:09 PM

stances. For example, a six-year statute of limitations applies to IRS assessments if

examples that relate to the story­ the taxpayer omits items of gross income that exceed 25 percent of the gross income
reported on the tax return. For fraudulent returns, or if the taxpayer fails to file a tax
line of the chapter. Students return, the news is understandably worse. The statute of limitations remains open
learn to refer to the facts pre- indefinitely in these cases.

sented in the storyline and apply Example 2-1

them to other scenarios—in this Bill and Mercedes file their 2012 federal tax return on September 6, 2013, after receiving an auto-
matic extension to file their return by October 16, 2013 (October 15 was a Sunday). In 2016, the IRS

way, they build a greater base of selects their 2012 tax return for audit. When does the statute of limitations end for Bill and
Mercedes’s 2012 tax return?

knowledge through application. Answer: Assuming the six-year and “unlimited” statute of limitation rules do not apply, the statute
of limitations ends on September 6, 2016 (three years after the later of the actual filing date and the

Many examples also include original due date).

What if: When would the statute of limitations end for Bill and Mercedes for their 2012 tax return

“What if ?” scenarios that add if the couple filed the return on March 22, 2013 (before the original due date of April 15, 2013)?
Answer: In this scenario the statute of limitations would end on April 15, 2016, because the later
more complexity to the example of the actual filing date and the original due date is April 15, 2013.

or explore related tax concepts. Taxpayers should prepare for the possibility of an audit by retaining all support-
ing documents (receipts, cancelled checks, etc.) for a tax return until the statute of
limitations expires. After the statute of limitations expires, taxpayers can discard the
majority of supporting documents but should still keep a copy of the tax return it-
“The case study approach is ex- self, as well as any documents that may have ongoing significance, such as those es-
tablishing the taxpayer’s basis or original investment in existing assets like personal
cellent as you follow the taxpay- residences and long-term investments.

ers through the chapters.” LO 2-2 IRS AUDIT SELECTION

Why me? This is a recurring question in life and definitely a common taxpayer ques-
– Irwin Uhr, Hunter College tion after receiving an IRS audit notice. The answer, in general, is that a taxpayer’s
return is selected for audit because the IRS has data suggesting the taxpayer’s tax
return has a high probability of a significant understated tax liability. Budget con-
straints limit the IRS’s ability to audit a majority or even a large minority of tax re-
turns. Currently, fewer than 2 percent of all tax returns are audited. Thus, the IRS
xiv must be strategic in selecting returns for audit in an effort to promote the highest
level of voluntary taxpayer compliance and increase tax revenues.
Specifically, how does the IRS select tax returns for audit? The IRS uses a num-
ber of computer programs and outside data sources (newspapers, financial statement
disclosures, informants, and other public and private sources) to identify tax returns
that may have an understated tax liability. Common computer initiatives include the
THE PEDAGOGY YOUR STUDENTS NEED
TO PUT THE CODE IN CONTEXT
Taxes in the Real World
Taxes in the Real World are short
throughout the book to demonstrate
$80,000 of taxable income
(3) Taxable income before additional $160,000.00
world use of tax concepts. Current articles on$ tax
(4) Tax on $160,000 taxable income
issues, real-world application
Marginal tax
tax rules, and short vignettes on popular news
Note that Bill and Mercedes’s marginal tax rate on the $80,000 increase in taxable income rests
about tax are some of thebetween
issues
in the Real World boxes. ($231,450
$231,450 = $8,550) taxed at 33 percent.
“The Spilker text makes tax easy for students to un-
derstand. It integrates great real-world examples so
students can see how topics will be applied in
practice. The integration of the tax form and exhibits
of the tax forms in the text are outstanding.”
– Kristen Bigbee,
The Key Facts
Marginal Key Facts
provide quick synop-
ses of the critical
pieces of information
presented through-
out each chapter.
Exhibits
Today’s students are visual learners,
and McGraw-Hill’s Taxation delivers
The marginal tax rate is particularly useful in tax planning because it represents
by making appropriatetheuse oftaxation
rate of
diagrams, and tabular demonstrations
deductions). In Chapter 3, we discuss basic tax planning strategies that use the mar-
ginal tax rate.
of key material. The average tax rate represents a taxpayer’s average level of taxation on each
“A good textbook that uses
amples throughout the chapters
give a student an understanding of
the tax theory and how it applies to
the taxpayers.”
– Jennifer Wright,
Drexel University
spi4866x_ch01_000-029.indd 7
CHAPTER 1 An Introduction to Tax 1-3
CHAPTER 1 An Introduction to Tax 1-7
TAXES IN THE REAL WORLD Republicans vs. Democrats
We often boil down the tax policy of our major Republicans also seek to limit income taxes for
Description
boxes used Amount Explanation political parties into its simplest form: Demo-
crats raise taxes to fund social programs, and
individuals so that people can hold on to more
disposable income, which they can then spend,
the real-
Example 1-3. Republicans lower taxes to benefit big busi-
nesses and the wealthy. Both ideas simplify the
Political Ideology: Democrat
save, or invest.
policy of each party, yet both ideas are essen-
The tax policy for the Democratic Party calls for
31,785.50 Example 1-3. tially true.
raising certain taxes to provide money for gov-
Whether you agree with more government
ofratechapter-specific
on additional 28.53%
¢Tax
¢Taxable income
= [ (2) − (4) ]/[ (1) − (3) ]
ernment spending, which in turn generates
spending or tax breaks for corporations, each
business. The party platform asserts that gov-
party’s agenda will affect your taxes.
ernment spending provides “good jobs and will
Political Ideology: Republican help the economy today.”
Many Democrats are adherents to Keynes-
covered
the 28 percent and 33 inpercent
Taxes “We believe government should tax only to raise
bracket rates because a portion of the additional income
money for its essential functions.” The Republi-
ian economics, or aggregate demand, which
holds that when the government funds pro-
cans state their case plainly on the Republican
− $160,000 = $71,450) is taxed at 28 percent with the remaining income ($240,000 −
National Convention website. That is, Republi-
cans believe government should spend money
grams, those programs pump new money into
the economy. Keynesians believe that prices
tend to stay relatively stable and therefore any
only to enforce contracts, maintain basic infra-
structure and national security, and protect citi- kind of spending, whether by consumers or the
government, will grow the economy.
zens against criminals.
Like the Republicans, Democrats believe
The literature of the House Republican Con-
the government should subsidize vital services THE KEY FACTS
ference goes on to illuminate the role of the
that keep cities, states, and the country run- Example 1-5
government and how tax policies affect individ- What Qualifies
uals: “The money the government spends does ning: infrastructure such as road and bridge as a Tax?
Assume now that, instead of receiving a book advance,not Bill andtoMercedes
belong start
the government; the maintenance and repairs for schools. Demo-
a newtobusiness
it belongs
• The general purpose of
crats also call for tax cuts for the middle class.
taxpayers who earned it. Republicans believe taxes is to fund govern-
that loses $60,000 this year (it results in $60,000 of additional tax deductions). What would be their
Americans deserve to keep more of their own
But who benefits most under each platform?
ment agencies.
marginal tax rate for these deductions? money to save and invest for the future, and
The conventional wisdom is that corporations
low tax policies help drive a strong and healthy and the wealthy will benefit more with a Repub-
• Unlike fines or penalties,
taxes are not meant to
Answer: 25.41 percent, computed as follows:
economy.”
lican tax policy, while small businesses and
Tax relief is the Republican route to growing middle-class households will benefit from a
punish or prevent illegal
behavior; but “sin taxes”
Description Amount Explanation
the economy. A Republican government would
Democratic tax policy. are meant to discourage
Texas
(1) Taxable Tech
income University
with additional $100,000.00
reduce taxes for businesses to allow busi-
$160,000 taxable income stated in
nesses to grow and thus hire more employees.
Source: http://www.investopedia.com/articles/
economics/09/us-parties-republican-democrat-taxes.asp
some behaviors.
• The three criteria neces-
$60,000 of tax deductions Example 1-3 less $60,000. sary to be a tax are that
the payment is
(2) Tax on $100,000 taxable income $ 16,542.50
Using the rate schedule in Example 1-3, • required
In summary, taxes affect many aspects of personal, business, and political deci-
$16,542.50 = $10,367.50 + 25% × • imposed by a
sions. Developing a solid understanding of taxation should allow you to make in-
formed ($100,000
decisions − in
$75,300).
these areas. Thus, Margaret can take comfort that her semester
THE KEY FACTS
government
• and not tied directly to
$160,000.00 will likely prove useful to her personally. Who knows? Depending on her interest in
(3) Taxable income before additional Example 1-3. the benefit received by
business, investment, retirement planning, and the like, she Different may ultimately the taxpayer.
$60,000 of tax deductions Ways decide
to to
pursue a career in taxation.
(4) Tax on $160,000 taxable income $ 31,785.50 Example 1-3.
Measure Tax Rates
• Marginal tax rate
Marginal tax rate on additional 25.41%WHAT QUALIFIES
¢Tax
¢Taxable income
= [AS (2) −A (4)TAX?
]/[ (1) − (3) ] • The tax that applies to LO 1-2
next increment of in-
$60,000 of tax deductions “Taxes are the price we pay for a civilized society.”—Oliver Wendell
Taxes have been described in many terms: some positive, some negative, some
Holmes Jr.
come or deduction.
Bill and Mercedes’s marginal tax rate on $60,000 ofprove
printable, some not. Let’s go directly to a formal definition
additional
usefuldeductions
in identifying (25.41 percent)
alternative differs
taxes
• =of a tax,¢Tax
which should
taxincome
¢Taxable
and discussing alternative systems.
from their marginal tax rate on $80,000 of additional taxable
narios because the relatively large increase in deductions
A tax
efit causes
income
or service
(28.53 required
is a payment
received
some
percent)byinathese
fromincome
of their the government.
to be taxed
sce- that is unrelated
government to any specific ben-
• Useful in tax planning.
The general purpose of a tax is to fund
the operations • Average
raise revenue).2-7Taxes tax from
rate fines and
in income of the government (to income differ
CHAPTER 2 Tax Compliance, the IRS, and Tax Authorities
in a lower tax rate bracket and the relatively large increase caused some of their
penalties in that taxes are not intended to punish or prevent • Aillegal
taxpayer’s averageNone-
behavior.
to be taxed in a higher tax rate bracket.
EXHIBIT
small changes in income and deductions.
Taxpayers often will by
2-2 IRS Appeals/Litigation
theless, face the same
allowing
Process marginal
deductions taxincome,
from rates for our federal taxlevel of taxation
system on each
does encourage
dollar of taxable income.
1a. Agree with proposed IRS Exam 1b. Disagree with
adjustment proposed adjustment
Total tax
• =
Pay Taxes Due 30-Day Letter
Total income
• Useful in budgeting tax
charts,
or savings that would apply to additional taxable income (or tax
expense.
• Effective tax rate
spi4866x_ch01_000-029.indd 3 3a. Agree with proposed
adjustment
2a. Request appeals
2b. No • A taxpayer’s average
Appeals Conference taxpayer
3b. Disagree with proposed adjustment
response rate of taxation on each
dollar of total income
File Suit in U.S. District
dollar of taxable income. Specifically,
Court or U.S. Court of
Federal Claims
5. IRS denies
File Claim for
Refund with the IRS
90-Day Letter (taxable and nontaxable
refund claim 4b. Pay tax
income).
Total Tax Total tax
• =
Eq. 1-3 Average Tax Rate = Total income
Taxable Income 4a. Do not pay tax;
Petition Tax Court
• Useful in comparing the
Thegreat
averageex-
tax rate is often used in budgeting tax expense as a portion of income
Tax Court
relative tax burdens of
taxpayers.
(what percentto of taxable income earned is paid in tax).
IRS Exam: © Royalty-Free/Corbis, Supreme Court: © McGraw-Hill Education/Jill Braaten, photographer, File Claim: © Michael A.
Keller/Corbis
Federal Claims to interpret and rule differently on the same basic tax issue. Given a
choice of courts, the taxpayer should prefer the court most likely to rule favorably on
“Spilker’s use of examples immediately following the
his or her particular issues. The courts also differ in other ways. For example, the U.S.
District Court is the only court that provides for a jury trial; the U.S. Tax Court is the
only court that allows tax cases to be heard before the taxpayer pays the disputed liabil-
concept is a great way to reinforce the concepts.”
ity and the only court with a small claims division (hearing claims involving disputed
liabilities of $50,000 or less); the U.S. Tax Court judges are tax experts, whereas the
U.S. District Court and U.S. Court of Federal Claims judges are generalists. The tax-
payer should consider each of these factors in choosing a trial court. For example, if
– Karen Wisniewski, County College of Morris
the taxpayer feels very confident in her tax return position but does not have sufficient
funds to pay the disputed liability, she will prefer the U.S. Tax Court. If, instead, the
2/8/16 7:02 AM
taxpayer is litigating a tax return position that is low on technical merit but high on
emotional appeal, a jury trial in the local U.S. District Court may be the best option.
What happens after the taxpayer’s case is decided in a trial court? The process may
not be quite finished. After the trial court’s verdict, the losing party has the right to
request one of the 13 U.S. Circuit Courts of Appeals to hear the case. Exhibit 2-3 de-
picts the specific appellant courts for each lower-level court. Both the U.S. Tax Court
and local U.S. District Court cases are appealed to the specific U.S. Circuit Court of
Appeals based on the taxpayer’s residence.9 Cases litigated in Alabama, Florida, and
9
Decisions rendered by the U.S. Tax Court Small Claims Division cannot be appealed by the taxpayer
or the IRS.
xv
spi4866x_ch02_000-035.indd 7 2/23/16 5:30 PM
 Mercedes have a good likelihood of a favorable resolution at the appeals conference.
In this chapter we discussed several of the fundamentals of tax practice and pro-
cedure: taxpayer filing requirements, the statute of limitations, the IRS audit process,
the primary tax authorities, tax research, tax professional standards, and taxpayer
and tax practitioner penalties. For the tax accountant, these fundamentals form the
basis for much of her work. Likewise, tax research forms the basis of much of a tax
professional’s compliance and planning services. Even for the accountant who
doesn’t specialize in tax accounting, gaining a basic understanding of tax practice

PRACTICE MAKES PERFECT WITH A …

and procedure is important, as assisting clients with the IRS audit process is a valued
service that accountants provide, and clients expect all accountants to understand
basic tax procedure issues and how to research basic tax issues.

Summary
LO 2-1
2-30 CHAPTER 2
Tax Compliance, the IRS, and Tax Authorities
LO 2-2
KEY TERMS
30-day letter (2-6)
90-day letter (2-6)
acquiescence (2-17)
action on decision (2-17)
annotated tax service (2-18)
Circular 230 (2-24)
Summary
Identify the filing requirements for income tax returns and the statute of limitations for A unique feature of McGraw-Hill’s
assessment.
● All corporations must file a tax return annually regardless of their taxable income.
Taxation is the end-of-chapter
Estates and trusts are required to file annual income tax returns if their gross income
exceeds $600. The filing requirements for individual taxpayers depend on the taxpayer’s summary organized around learn-
●
filing status, age, and gross income.
Individual and C corporation tax returns (except for C corporations with a June 30 year-
ing objectives. Each objective has a
end) are due on the fifteenth day of the fourth month following year-end. For C corpora-
tions with a June 30 year-end, partnerships and S corporations, tax returns must be filed brief, bullet-point summary that
by the fifteenth day of the third month following the entity’s fiscal year-end. Any taxpayer
unable to file a tax return by the original due date can request an extension to file. covers the major topics and con-
● For both amended tax returns filed by a taxpayer and proposed tax assessments by the
IRS, the statute of limitations generally ends three years from the later of (1) the date cepts for that chapter, including
chapter
Tax Compliance,
2
the tax return was actually filed or (2) the tax return’s original due date.
references to critical exhibits and
the IRS, and Tax
Outline the IRS audit process, how returns are selected, the different types of audits, and
what happens after the audit.
examples.
●
Authorities
The IRS uses a number of computer programs and outside data sources to identify tax
returns that may have an understated tax liability. Common computer initiatives include
the DIF (Discriminant Function) system, document perfection program, and information
information
matching program. matching program (2-4) Statements on Standards for Tax
All end-of-chapter
● The three
Internal material is tied to learning objectives:
types ofRevenue
IRS audits Code
consistof 1986 (2-11) office, andServices
of correspondence, (SSTS) (2-23)
field examinations.
After the audit, the IRS will send the taxpayer a 30-day letter, which provides the taxpayer
●
interpretative regulations (2-16) statute of
the opportunity to pay the proposed assessment or request an appeals conference.
limitations (2-3)
legislative
If an agreement regulations
is not (2-16)
reached at appeals or the taxpayer doessubstantial authority (2-24)
not pay the proposed
Learning Objectives
nonacquiescence (2-17) tax treaties (2-14) “You can tell the authors of this
technical advice memorandum (2-16)
office examination (2-6) textbook are still in the classroom
Upon completing this chapter, you should be able to:

citator (2-21) LO 2-1 primary

Identify the authority (2-9) temporary
of limitationsregulations (2-15)
topical tax service (2-19) and responsible for the day-to-day
filing requirements for income tax returns and the statute
for assessment.
civil penalties (2-26) private letter rulings (2-16)
correspondence examination (2-5)
LO 2-2 Outline the IRS audit process, how returns are selected, the different types of audits,
procedural
and what happens regulations
after the audit. (2-16)
U.S. Circuit Courts of Appeal education
(2-7) of accounting students.
Examples are representative of the
spi4866x_ch02_000-035.indd 28 1/19/16 11:23 AM
criminal penalties (2-26) LO 2-3 proposed regulations
Evaluate the relative weights of the(2-15)
various tax law sources.
U.S. Constitution (2-11)
U.S. Court of Federal Claims (2-6)
determination letters (2-16) LO 2-4 question
Describe theof fact process
legislative (2-19) as it pertains to taxation.
U.S. District Court (2-6)
end-of-chapter problems, and the
DIF (Discriminant Function) LO 2-5 question
Perform the of
basiclaw
steps (2-19)
U.S. Supreme Court (2-8) end-of-chapter summary is an ex-
in tax research and evaluate various tax law sources when
system (2-4) faced with ambiguous statutes.
regulations (2-15)
document perfection program (2-4) LO 2-6 Describe tax professional responsibilities in providing tax advice.
revenue procedures (2-16) U.S. Tax Court (2-6) cellent study tool.”
field examination (2-6) LO 2-7 Identify taxpayer and tax professional penalties.
revenue rulings (2-16) writ of certiorari (2-8)
final regulations (2-15) secondary authorities (2-9) – Debra Petrizzo, Franklin University
Golsen rule (2-15) stare decisis (2-15)

Discussion
DISCUSSION QUESTIONS Questions
All applicable Discussion Questions are available with Connect ®. Discussion questions,
LO 2-1 1. Name three factors that determine whether a taxpayer is required to file a tax
spi4866x_ch02_000-035.indd 2 1/19/16 11:23 AM
now available in Con-
return. nect, are provided for
LO 2-1 2. Benita is concerned that she will not be able to complete her tax return by
April 15. Can she request an extension to file her return? By what date must each of the major
she do so? Assuming she requests an extension, what is the latest date that she concepts in each
could file her return this year without penalty?
chapter, providing
LO 2-1 3. Agua Linda Inc. is a calendar-year corporation. What is the original due date
for the corporate tax return? What happens if the original due date falls on a students with an op-
Saturday? portunity to review
LO 2-2 4. Approximately what percentage of tax returns does the IRS audit? What are key parts of the
the implications of this number for the IRS’s strategy in selecting returns for
“This is a very readable text. Students will understand it on their
audit? chapter and answer
own,
LO 2-2 5. Explain the difference between the DIF system and the National Research
generally, freeing more class time for application, practice, evocative questions
Program. How do they relate to each other?
and student
LO 2-2
questions.”
6. Describe the differences between the three types of audits in terms of their
about what they have
scope and taxpayer type. learned.
LO 2-2
– Valrie Chambers,
7. Simon just received a 30-day letter from the IRS indicating a proposed assessment.
Does he have to pay theTexas A&M
additional University–Corpus
tax? What are his options?Christi
LO 2-2 8. Compare and contrast the three trial-level courts.
LO 2-3 9. Compare and contrast the three types of tax law sources and give examples of
each.
LO 2-3 10. The U.S. Constitution is the highest tax authority but provides very little in the
way of tax laws. What are the next highest tax authorities after the U.S.
Constitution?
xviLO 2-3 11. Jackie has just opened her copy of the Code for the first time. She looks at the
table of contents and wonders why it is organized the way it is. She questions
whether it makes sense to try and understand the Code’s organization. What
 spi34872_ch02_000-035.indd Page 2-34 20/10/14 4:06 PM f-500 /202/MH02357/spi34872_disk1of1/1259334872/spi34872_pagefiles
ployment taxes) to employees, $45,000 of supplies, and $18,000 in rent and
other administrative expenses.
2-32 CHAPTER 2 Tax Compliance, the IRS, and
b) As a salesperson, Tax Authorities
Alyssa incurred $2,000 in travel expenses related to her em-
ployment that were not reimbursed by her employer.
LO 2-6 37.
c) The Levi is recommending
Johnsons own a piecea of taxinvestment
return position to hisThey
real estate. client. paidWhat
$500standard
of real must
2-34 CHAPTER 2 he IRS,
Tax Compliance,property
the meet and toTax
taxes satisfy
on the hisproperty
Authorities professionaland they standards?
incurredWhat $200 of is the sourceinoftravel
expenses this profes-
sional
costs to standard?
see the property and to evaluate other similar potential investment
LO 2-3 LO63. 2-6 For38. each What
properties.
of the is Circular
following230? citations, identify the type of authority (statutory,
LO 2-7 administrative,
39.
d) The What areorthe
Johnsons judicial)
basic
own and explain
differences
a rental the
home.between
They citation.
civil and
incurred criminal
$8,500 tax penalties?
of expenses associ-

…WIDE VARIETY OF ASSIGNMENT MATERIAL

LO 2-7 a) IRC40.atedSec.with
What arethe
280A(c)(5) someproperty.
of the most common civil penalties imposed on taxpayers?
LO 2-7 b) Rev.
e) The Proc. 2004-34,
Johnsons’ home2004-1 was C.B.
only 911
five miles from
41. What are the taxpayer’s standards to avoid the substantial understatement the Staples store where Alyssa of
worked
c) Lakewood in January and
Associates,
tax penalty? RIAFebruary.
TC Memo The ST store was 60 miles from their home,
95-3566
LO 2-7 d) TAM42.soWhatthe Johnsons
200427004
are the tax decided to move to
practitioner’s make thetocommute
standards avoid a penaltyeasier forfor Alyssa.
recommending
The Johnsons’ new home was only ten miles from the ST store. However, it
e) U.S. av.tax return
Muncy, position?
2008-2 USTC par. 50,449 (E.D., AR, 2008)
was 50 miles from their former residence. The Johnsons paid a moving com-

Problems Problems are designed to 64. Justinepany

LO 2-4 would $2,000 move their
like to clarify possessions to the
her understanding of anew code location.
section They recentlyalsoenacted
drove
the 50 miles
by Congress. Whattotax their
lawnew residence.
sources They stopped
are available to assist along the way for lunch
Justine?
PROBLEMS
and spent $60 eating at Denny’s. None of the moving expenses were reim-
test the comprehension of more LO 2-5 65. Aldina has identified conflicting authorities that address her research question.
How
bursed
Allshould
applicable by ST. problems
she evaluate areauthorities
these available with to make Connect ®
.
a conclusion?
f ) Jeremy paid $4,500 for health insurance coverage for himself (not through an
complex topics. Each problem at LO 2-5 LO66. 2-1 Georgette
question. hear
Jeremy
has identified
43.exchange).
Ahmed
Whatthat
does
Alyssa
must
is not
notwas ahave
sherequest
heeligible
can
1983
dofor tothe
courtbycase
enough
covered
determine
anplan
cash
health
extension
until
that
onplans
if next
the
appears
hand
tocase
file
year.
to answer
to pay
provided
stilltax
his
hisbytaxes.
represents
herher
return. Does
research
He was excited
employer,
“current”
but
this solve his
to

the end of the chapter is tied to LO 2-5 LO67.

law? problem? What are the ramifications if he doesn’t pay his tax liability by April 15?
2-1 Sandy
g) Jeremy paid $2,500 in self-employment taxes ($1,250 represents the employer
has
44.portion
Moltodetermined
Stancha
of that her research
Corporation
the self-employment had question
taxes).zero earningsdependsthis upon fiscaltheyear;
interpretation
in fact, they lost
one of that chapter’s learning ob- LO 2-1
of the phrase
is
money.
h) Jeremy
this?
45.marriage.
“not
paidMust compensated
$5,000theyinfile a tax
alimony
by return?
insurance.” What type of research question
and $3,000 in child support from his prior
The estate of Monique Chablis earned $450 of income this year. Is the estate
jectives, with multiple problems LO 2-5 68. J. C.i) has
LO 2-1 and46.
required
beenpaid
Alyssa
believes
Jamarcus,
versity. the
to$3,100
Theincome
file anofincome
a professional
a full-time
Johnsons
gambler
tuition
is tax-free.
student,
would
tax
and return?
for
like earned
many
fees
to deduct
years. night
to attend
$2,500
as much
He loves
this ofyear
classesthisatline
thisfrom
of work
a local
a summer
expenditure
uni-
as job. He
for critical topics. research a) Usepossible
correct.
an
hadavailable
this Is the
year.
othertax
norather
answer
His
research
income
than
to
employer
claimthisaservice
this
year
credit.
question
withheld
j) The Johnsons donated $2,000 to their favorite charity.
to determine
and will have zero
found
$300 ofin the
federal
whether federal
Internal
income
J. C.’s
Revenue
tax
thinking
income
fromCode?
his
is
tax liability
summer
If not, pay.what type of authority
Is Jamarcus required answersto file a this question?
tax return? Should Jamarcus file a tax return?

Tax Forms Problems Tax forms prob- tax forms

LO 2-1 70.

69. Katie
Shauna
b) Write
47.
line gambler.
Coleman
a memo
Shane
Design (SD). When
is single.
hascommunicating
never
Shauna
filed aShe
does the wanted
works
taxthe
statute
asdespite
results
return anofarchitectural
to determine
of
your
limitations
research.
earning
her taxable
expire
designer for
excessive
income
sums Stream-
of money as a
for this
for the years inyear.
which
LO 2-5 Sherecently
correctly won a ceramic
calculated her dalmatian
AGI. valued
However, at $800
she wasn’ton surea television
how to compute game the
lems are a set of requirements in- research LO 2-1 on 48.
show.restShe
the
Shane
of her
has
questions not
taxablewhether
filed
income.this
a tax return?
Sheprize
providedis taxable since it was
the following
Latoya filed her tax return on February 10 this year. When will the statute of
show.
that you could use it to determine her taxable income.
a “gift” she
information withwon
hopes

cluded in the end-of-chapter material a) Use an

49.
LO 2-1 b) Write
limitations
a) Shauna
availableexpire
Using
a letter
paid
thetofacts
tax research
$4,675
Katie from
for thisservice
forthemedical
communicating
tax return?
previous
to answer Katie’s question.
expensesproblem,
the
and Blake,would
resultshow
Shauna’s
of your research. your boyfriend,
answer change if
drove Shauna (in her car) her aincome
total ofby115 40 miles so that shewould
couldyour receive care change
of the 2017 edition. These problems LO 2-5 70. Pierre for
Latoya
a
recentlybroken
understated
ankle
received ashetax sustained
penalty in
for a biking
failing
if Latoya intentionally failed to report as taxable income any
percent?
toaccident.
file a
How
tax return. Hecash
answer
was payments she
upset toreceived
b) Shaunareceive paidthe
from apenalty,
total of but
her clients?$3,400he was comforted
in health insurance by the thoughtduring
premiums that hethe willyear
require students to complete a tax research LO 2-2 get 50. a tax
(not
a) Usesides
deduction
Paula
an
through
couldan
the health
forexchange).
paying the penalty.
not reach an SD
taxinsurance
did not reimburse
agreement
premiums
with the IRS
and the medical
anyat ofherthisappeals
expenses
expense.conference
Be-
for her broken
and
hasavailable
just received research
a 90-dayservice letter.to If determine
she wants iftoPierre litigate is the
correct.
issue but does not
form (or part of a tax form), providing students with valuable experience and practice with b) Write ankle,
a Shauna
memo had Lasik eyethe
communicating surgery
results lastof year
your and she paid $3,000 for the
research.
have sufficient cash to pay the proposed deficiency, what is her best court choice?
surgery (she received no insurance reimbursement). She also incurred $450
LO 2-5 LO71. 2-2 Paris51.was
ofInother
choosing
happy a trial-level
to provide court,the how
a contribution year.toshould
her frienda court’s
Nicole’s previouscampaignrulings influence
­filling out these forms. These requirements—and their relevant forms—are also included in for mayor,
medical
the especially
choice? How
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aftershould
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she learned
circuitthat court charitable contributions
rulings influence are tax choice of
the taxpayer’s
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Sophia recentlytax service
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recently heard
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that the Supreme Court denied the writ of certiorari. Should she be happy or
b) Writenot, and why?
a memo communicating the results of your research.
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Lori recently tax return was audited
were divorced. becausegrief
Although she failed
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at she earned
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research LO 2-2 particularly tax return
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alimony was notincorrectly.
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return is forcorrect.
audit? Would
lems throughout the end of LO 2-2 your 55.answer
Randy change
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Loriofcontinued
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73. Shaun his
is a income
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college He
football recently
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In the an
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he has notice
always requesting
bought documentation
football
the chapter assignment mate-
LO 2-5
tickets on forthe
his street
itemized from deductions.
ticket scalpers. WhatThis audit procedure
year, he decided likely toidentified
join the his tax return
research university’sfor audit?
ticket program, which requires a $2,000 contribution to the university
rial. These require students to for the “right” to purchase tickets. Shaun will then pay $400 per season ticket.
Shaun
spi34872_ch02_000-035.indd Page 2-33 20/10/14 understands
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do both basic and more complex research on topics outside of the scope of the book. Each
­research problem includes an icon to differentiate it from regular problems. 4-40 CHAPTER 4 Individual Income Tax Overview, Exemptions, and Filing Status
CHAPTER 2 Tax Compliance, the IRS, and Tax Authorities 2-33
spi4866x_ch02_000-035.indd 32 1/19/16 11:23 AM
filing a separate tax return. In year 4, the couple divorced. Both Jasper and
52. Sophia recently won aCrewella
tax case filed
litigated
singlein tax
the returns
7th Circuit.
in yearShe4.recently
In year 5, heard
the IRS audited
LO 2-2 the couple’s

“The textbook is comprehensive, uses an integrated approach to taxation, contains clear illustra-
that the Supreme Court
not, and why?
jointdenied
year the
2 taxwrit and eachShould
of certiorari.
return spouse’s she be happy
separate yearor3 tax returns. The IRS
determined that the year 2 joint return and Crewella’s separate year 3 tax return
tions and examples in each chapter, and has a wealth of end-of-chapter assignment material.”
53. Campbell’s tax return understated
on her tax return. What taxIRSliability
Crewella’s
was audited because
audittoselection
sheself-employment
be understated
methodby $4,000 and
identified
incomeshe
failed to report interest causing
her Crewella’s
earned the joint return year 2
LO 2-2
tax return?year 3 separate return
tax liability to be understated by $6,000. The IRS also assessed penalties and
54. Yong’s tax return was audited because he calculated his tax liability incorrectly.
– James P. Trebby, Marquette University
LO 2-2
interest on both of these tax returns. Try as it might, the IRS has not been able
What IRS audit procedure identified his tax return for audit?
to locate Crewella, but they have been able to find Jasper.
55. Randy deducted a high a) level
Whatofamount
itemized of deductions
tax can the two IRSyears
requireagoJasper
relative to for the
to pay LO 2-2
Dahvill’s year
his income level. He recently received
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Explain.
for his itemized deductions. What audit procedure likely identified his tax
b) What amount of tax can the IRS require Jasper to pay for Crewella’s year 3
return for audit?
Planning Problems Planning problems
separate tax return? Explain.
56. Jackie has a corporate
LO 4-3
client Traylor
51. Janice that hasisrecently
single. She received
has an a 30-day noticeson
18-year-old from
namedthe Marty.
LO 2-2
Marty is
IRS with a $100,000 tax assessment.
Janice’s Her Marty
only child. client ishasconsidering
lived with requesting an life. However, Marty
Janice his entire planning
are another unique set of problems, appeals conference
research to contest the
Duringrequesting
assessment.
the currentanyear,
What
appeals
Marty
factors
conference?
should Jackie advise
recently joined the Marines and was sent on a special assignment to Australia.
her client to consider before spent nine months in Australia. Marty was

also located at the end of the chapter 57. The IRS recently completedextremely
home. However,
additional tax. Shea requested
homesick
an audit
an appealsMarty
whiletax
of Shea’s in Australia,
return andsince
knew this
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filed as head
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and(and
of household,
based
the 2ndhe continues
Circuit has
and Marty
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has always
alternative
meet all ruled
the tests
facts:been considered a
with the possible excep-
against
­students to test their tax planning skills the position Shea istion of the residence test due to his stay in Australia). However, this year Janice
litigating.
b) The Federal CircuitisCourt unsureofwhether
Appealsshe hasqualifies
recentlyasruled
headinoffavor
household
of Shea’s due to Marty’s nine-

after covering the chapter topics. Each planning problem includes an icon to differentiate it from
position. month absence during the year. Janice has come to you for advice on whether
she qualifies for head of household filing status. What do you tell her?
c) The issue being litigated involves a question of fact. Shea has a very appealing
tell but52. Doug Jones case
submitted
law to his 2016 her tax return on time and elected married filing
regular problems. story LO
to 4-3 little favorable support position.
jointly status with his wife, Darlene. Doug and Darlene did not request an
d) The issue being litigated is highly technical, and Shea believes strongly in her
research extension for their 2016 tax return. Doug and Darlene owed and paid the IRS
interpretation of the law.
$124,000 for their 2016 tax year. Two years later, Doug amended his return and
e) Shea is a local elected officialmarried
and would
filingprefer to minimize any local publicity
Comprehensive and Tax Return Problems Comprehensive and tax return problems address mul- claimed

original joint is
return
separate status. By

than heaowed
changing

on a separate
his filing status, Doug
regarding the case. sought a refund for an overpayment for the tax year 2016 (he paid more tax in
the (5th return).
a IsLO Doug
58. Juanita, a Texas resident Circuit), researching tax question and finds 2-3 allowed to
tiple concepts in a single problem. Comprehensive problems are ideal for cumulative topics; for
5th Circuit case rulingchange his filing status
that is favorable
Which circuit case hasamended return?
more “authoritative
and a 9thfor the 2016case
Circuit tax that
yearisand
weight” and why? How would your
receive a tax refund with his
unfavorable.

this reason, they are located at the end answer change if Juanita were a Kentucky resident (6th Circuit)?
59. Faith, a resident of Florida (11th Circuit) recently found a circuit court case LO 2-3
that is favorable toCOMPREHENSIVE PROBLEMS
of all chapters. In the end-of-book her research question. Which
to have issued the opinion?
two circuits would she prefer

Select problems are available in Connect . ®

Appendix C, we include tax return 60. Robert has found a “favorable” authority directly on point for his tax question.
If the authority is53.
a court
Marccase,
opinion? Which court$12,000,
which court
and Michelle
would he
are would
marriedheand
tax forms
least preferIntoaddition
prefer
have issued
to have
earned issued
salaries
the salaries,
thisthe
year of $64,000 and
opinion?they received interest of $350
LO 2-3

respectively. to their
problems that cover multiple chapters. from municipal
61. Jamareo has found a “favorable” bondsdirectly
authority
paid $2,500 of authority,
If the authority is an administrative
and $500
qualifyingwhich
moving
from corporate
on point for his tax bonds.
expenses,
specific typeand
Marc and Michelle also
question.
Marc paid alimony to a prior
of authority
LO 2-3

Additional tax return problems are also spouse

available in the Connect Library.
would he prefer to answer hisinquestion?
Matthew,
he least prefer to answer
the amount
Whichof $1,500. Marc and
administrative Michelle
authority have a 10-year-old son,
would
who lived with them throughout the entire year. Thus, Marc and
his question?
Michelle are allowed to claim a $1,000 child tax credit for Matthew. Marc and
62. For each of the following citations, identify the type of authority (statutory,
Michelle paid $6,000 of expenditures that qualify as itemized deductions and
administrative, or judicial) and explain the citation.
they had a total of $5,500 in federal income taxes withheld from their
LO 2-3

a) Reg. Sec. 1.111-1(b)paychecks during the course of the year.

b) IRC Sec. 469(c)(7)(B)(i)
a) What is Marc and Michelle’s gross income?
c) Rev. Rul. 82-204, 1982-2 C.B.
b) What 192 and Michelle’s adjusted gross income?
is Marc xvii
d) Amdahl Corp., 108 c)TCWhat
507 (1997)
is the total amount of Marc and Michelle’s deductions from AGI?
e) PLR 9727004
f ) Hills v. Comm., 50 AFTR2d 82-6070 (11th Cir., 1982)

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Another random document with
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 John Kepler, for this was the name of that famous mathematician,
was born at Wiel, in the duchy of Wirtemberg, in the year 1571; and
the Abbé Delaporte says, his family was illustrious. He died at
Ratisbon, in 1630. W. B.

A20. The true invention of the telescope cannot be carried back to

an earlier date than the beginning of the seventeenth century.
Johannes Baptista Porta, a Neapolitan, in his Natural Magic, which
was published in the year 1589, says, “Si utramque (lentem
concavam et convexam) recté componere noveris, et longinqua et
proxima majora et clara videbis:” and he is said to have made a
telescope, accordingly, about the year 1594. But Porta is
represented as having made this discovery such as it was, by
accident; and, as not well understanding the proper use of his own
invention.

According to Baron Bielfeld,[A20a] however, telescopes were first

constructed a long time after, in Holland; some say, by John
Lippersheim, a spectacle-maker at Middelbourg in Zealand; others,
by James Metius, brother to the celebrated professor Adrian Metius,
of Franeker. Although the invention of this instrument, of
indispensable use in astronomy, is sometimes attributed to the great
Galileo, he has himself acknowledged, in his treatise, entitled
Nuncius Siderius, that he took the hint from a report of a German
having invented an instrument, by means of which, and with the
assistance of certain glasses, distant objects might be distinguished
as clearly as those that were near. This is precisely what Porta had
mentioned in his book, in 1589; and therefore, if Galileo had not
referred to a German, he might be supposed to have had in his view
the Neapolitan’s conception of a telescope, announced long before
such an instrument was properly constructed.

Whatever may have been the merit of Porta’s discovery, or the

pretensions of Lippersheim, the spectacle-maker, and Metius, Peter
Borel (in his treatise De vero Telescopii Inventore) is of the opinion
that Zachariah Johnson, who, like Lippersheim, was a spectacle-
maker, and in the same city, made this discovery by chance, about
the year 1500; that Lippersheim imitated him, after making numerous
experiments; and that he instructed Metius. There are others, who
have been considered as having had some sort of claim to this
important invention; among whom were a Mr. Digges, of England,
and a M. Hardy, of France, both towards the commencement of the
seventeenth century.

It is certain, however, that Galileo in Italy, (who died in 1642, aged

seventy-eight years,) and, according to Bielfeld, Simon Marius in
Germany, were the first that applied the telescope to the
contemplation of celestial objects. W. B.
A20a. Elem. of Univ. Erud. b. i. ch. 49.

A21. In treating of the astronomy of the Greeks, Lalande contents

himself with barely introducing the name of Aristotle, among their
philosophers; seeming to consider him as one who had done very
little for astronomical science. This philosopher (who died in the
sixty-third year of his age, and only 322 years B. C.) among his other
doctrines, not only maintained the eternity of the world; but, that
Providence did not extend itself to sublunary beings: and as to the
immortality of the soul, it is uncertain whether he believed it or not.
Bayle calls his logic and his natural philosophy, “the weakest of his
works:” and says, further; “It will be an everlasting subject of wonder
to persons who know what philosophy is, to find that Aristotle’s
authority was so much respected in the schools, for several ages,
that, when a disputant quoted a passage from this philosopher, he
who maintained the thesis durst not say, Transeat; but must either
deny the passage or explain it in his own way.” W. B.

A22. This discovery was made on the 8th of January, 1610. It was,
as Mr. Vince observes, a very important one in its consequences; as
it furnished a ready method of finding the longitude of places, by
means of their eclipses. W. B.

A23. Although both Geography and Navigation have been

wonderfully improved by the important discoveries made by the
moderns in astronomy, they have nevertheless, derived the most
essential aid from the application of the Compass to their purposes.

The invention of this instrument, which is of indispensible utility, is

almost universally ascribed to Flavio Gioia, a native of Amalfi in the
kingdom of Naples. He is called, by some writers, Flavio de Melfi, (by
which is meant, Flavio of Amalfi, this town being the place of his
nativity;) and his invention of the Compass is placed in the year
1302. But it is affirmed by others, that Paulus Venetus brought the
Compass first into Italy from China, in the year 1260. The Chinese
Compass, however, whatever may be its antiquity, appears to have
been a very imperfect instrument, compared with the modern
Mariner’s Compass; and, more especially, with the Azimuth
Compass, as improved by Dr. Knight and Mr. Smeaton. The Chinese
Compass, now used, is represented as being nothing more than a
magnetic needle kept floating, by means of a piece of cork, on the
surface of water, in a white china ware vessel, divided at bottom into
twenty-four points.

It is worthy of observation, that the French have laid claim to the

invention of the Compass, upon no better foundation than the
circumstance of a fleur de lys being always placed at the north point
of the chard; although it is known, that Gioia decorated the north end
of the needle with that flower in compliment to his own sovereign,
who bore it in his arms, as being descended from the royal house of
France. “It hath been often,” says Dr. Robertson,[A23a] “the fate of
those illustrious benefactors of mankind, who have enriched science
and improved the arts by their inventions, to derive more reputation
than benefit from the happy efforts of their genius. But,” continues
this eminent historian, “the lot of Gioia has been still more cruel;
through the inattention or ignorance of contemporary historians, he
has been defrauded even of the fame to which he had such a just
title. We receive from them no information with respect to his
profession, his character, the precise time when he made this
important discovery, and the accidents and enquiries which led to it:
the knowledge of this event, though productive of greater effects
than any recorded in the annals of the human race, is transmitted to
us without any of those circumstances which can gratify the curiosity
that it naturally awakens.” W. B.
A23a. Hist. of America, vol. i, b. i.

A24. Galileo Galilei was a strenuous defender of the system of

Copernicus; for which he was condemned by the inquisition, in the
year 1635, under Pope Urban VIII. This extraordinary man was a
native of Florence, and born in 1564. He died in 1642, aged seventy-
eight years.

W. B.

A25. It has been since ascertained that Saturn has seven

satellites, as is more particularly mentioned in the subsequent note.
W. B.

A26. It was about six years after the delivery of this oration, (viz.
on the 13th of March, 1781,) that Herschel discovered the Georgium
Sidus. And nearly eight years and an half after this first discovery, he
made two others: on the 28th of August, 1789, he was enabled to
ascertain, by means of his telescope of forty feet focal length, that
Saturn has a sixth satellite; and, on the 17th of September following,
he found that he has a seventh. The same celebrated astronomer
has since made several important discoveries. Thus, under the
liberal patronage of his sovereign, has the great Herschel
succeeded, by his extraordinary skill and industry in the making of
very large specula, in constructing telescopes, which, in the words of
the learned Mr. Vince, “have opened new views of the heavens, and
penetrated into the depths of the universe; unfolding scenes which
excite no less our wonder than our admiration.”

Many important discoveries (some of which are noticed in the

foregoing pages of these memoirs) have been made by other
eminent astronomers, since the date of Dr. Rittenhouse’s Oration;
some of them, indeed, since his decease; among which are the
discoveries of three new planets. W. B.
 A27. The celebrated Huygens, who, in his Latin works, is styled
Hugenius. W. B.

A28. Among the many eminent astronomers in the sixteenth and

seventeenth centuries, mentioned by Mr. Lalande, in his Astronomie,
with interesting particulars concerning most of them, the only notice
he there takes of his ingenious countryman, who endeavoured to
establish the theory of Vortices which he had projected, is in these
words: “Descartes (René,) né en Touraine en 1596, mort à
Stockholm en 1650. Sa vie a été écrite fort au long par Baillet, à
Paris, 1691, in 4o.” W. B.

A29. The philosophy of Aristotle retained terms so very obscure,

that it seems the Devil himself did not understand, or at least could
not explain them; otherwise we can hardly suppose, that, when the
good patriarch of Venice had summoned his attendance for this very
purpose, he would have been so rude as to put him off with an
answer not only unintelligible but inarticulate. See Bayle, in Art.
Barbaro.

A30. Alluding to the experiments made in France, for determining

the velocity of light; which, though unsuccessful, discovered a noble
philosophical spirit.

A31. This prodigious velocity of light can be no argument against

its materiality, as will appear from the following considerations. The
greatest velocity which we can communicate to any body, is that of a
cannon-ball, impelled by gun-powder; this may be at the rate of
about 20 miles in a minute of time. The planet Saturn moves about
360 miles in a minute, that is 18 times swifter than a cannon-ball;
and the comet of 1680, in its perihelion, moved near 56.66 times
swifter than Saturn, or 990.5 times swifter than a cannon-ball. Now
these are material bodies, moving with very various, and all of them
exceedingly great velocities; and no reason appears why the last
mentioned velocity should be the utmost limit, beyond which nature
cannot proceed; or that some other body may not move 7 or 8
hundred times swifter than a comet, as light is found to do.
 That the different refrangibility of the rays of light, on which their
colours depend, arises from their different velocities, seems so
natural a conjecture, that it has perhaps occurred to every one who
has thought on this subject. To this there are three principal
objections. The first is, that, according to this hypothesis, when the
satellites of Jupiter are eclipsed, their colour ought to change, first to
a green and then to a blue, before their light becomes extinct; which
is contrary to experience. But this objection appears to me of no
weight; for we do not lose sight of the satellite because there is no
light coming from thence to the eye, but because there is not light
enough to render it visible. Therefore at the time a satellite
disappears, there is still light of all colours arriving at the eye: and
though the blue light should predominate on account of its slower
progress, yet the red may predominate on another account; for along
the edge of Jupiter’s shadow, as it passes over the satellite, a
greater proportion of red light, than of blue, will be thrown by the
refraction of Jupiter’s atmosphere. The second objection is, that
since the velocity of the earth in its orbit, causes an aberration of
about 20 seconds in the place of a star, if the different colours of light
depended on different velocities, the aberration of blue light ought
proportionably to exceed that of red light, which would give such an
oblong form to a fixed star as might be discovered with a good
telescope. This objection is of no more force than the former. The
effect ought indeed to follow, but not in a sensible quantity; for at the
altitude of 70 degrees, the apparent place of a fixed star is likewise
removed 20 seconds by refraction, and the very same separation of
the rays must take place; yet this I think is not discoverable with the
best telescope. Perhaps by uniting these two equal causes, which
may be readily done, and thereby doubling the effect, it may become
sensible.

The third objection arises from that curious discovery of Dollond,

by which we are enabled so greatly to improve refracting telescopes.
And this objection I shall for the present leave in its full force; as well
against the above hypothesis, as against every other which I have
seen for the same purpose.
 A32. Mars appears to be surrounded by a very great and dense
atmosphere.

A33. Dr. Herschel discovered, in the year 1789, (fourteen years

after the delivery of this Oration,) two other satellites of Saturn.
These are the innermost of his (now) seven secondary planets.

W. B.

A34. In 745, Virgilus, bishop of Saltzburg, having publicly asserted

in some of his sermons, that there were antipodes, he was charged
with heresy, by Boniface, bishop of Mentz, and cited to appear
before the Pope, who recommended the hearing of the cause to
Utilo, King of Bohemia, and at the same time wrote to him in favour
of Boniface. The event was, the bishop of Saltzburg lost his cause,
and was condemned for heresy.

A35. It has been shewn, in a preceding note, how much the

means of communicating between distant regions, separated by
seas, ware facilitated by the discovery and use of the Compass: but
those means have been still further and very greatly improved, since
the introduction of the use of the Quadrant at sea, especially that
called Hadley’s Quadrant.

The true inventor of the reflecting Quadrant was Dr. Robert Hook,
a very ingenious English mathematician and philosopher, who died
in the year 1702, at the age of sixty-seven years. This instrument,
now commonly styled Hadley’s, was afterwards rendered much more
complete than Dr. Hook’s invention had made it, by Sir Isaac
Newton: but our modern artists, more skilful than those of former
times, as Mr. Lalande has observed, have profited of the ideas of the
great Newton himself, on the subject; and among the later improvers
of the Sea Quadrant, or Octant, is Mr. Hadley, whose name the
instrument usually bears.

It would, however, be doing an act of injustice to the memory of an

American who possessed an extraordinary genius, to omit, in the
course of these memoirs, some notice of his merits in relation to this
matter. Mr. Thomas Godfrey, a native of Pennsylvania, is said to
have turned his attention to this subject, so early as the year 1730;
and in the Transactions of the Royal Society of London, No. 435, will
be found, an “Account of Mr. Thomas Godfrey’s Improvement of
Davis’s Quadrant transferred to the Mariner’s Bow,” drawn up by
James Logan, Esq. formerly of Philadelphia, a gentleman of
extensive learning, and a very eminent mathematician, Mr. Godfrey
is stated to have “sent the instrument (which he had constructed) to
be tried at sea by an acquaintance of his, an ingenious navigator, in
a voyage to Jamaica, who shewed it to a captain of a ship there, just
going for England; by which means, it came to the knowledge of Mr.
Hadley, though perhaps without his being told the name of the real
inventor.” [See The American Magazine, for July 1758.] In a letter,
dated at Philadelphia the 25th of May, 1732, Mr. Logan, who very
ably as well as meritoriously patronized Godfrey, communicated to
the celebrated Dr. Edmund Halley a detailed account and description
of the improved Sea-Quadrant constructed by that ingenious citizen
of America, of which his patron confidently believed him to be the
original inventor. On the 28th of June, 1734, a further account of
Godfrey’s invention was drawn up by Mr. Logan, and subscribed with
his name; which, it is presumed, was also communicated to the
Royal Society: and on the 9th of November, in the same year, Mr.
Godfrey transmitted an account of it, draughted and signed by
himself, to the same learned body. The whole of these interesting
letters, with some accompanying observations on the subject, are
published in the valuable Magazine just referred to, and in the one
for the succeeding month.

In the Transactions of the Royal Society, for the months of

October, November and December, 1731, No. 421, is contained a
Proposal, by Dr. Edmund Halley, for finding the longitude at sea,
within a degree or twenty leagues, &c. In the conclusion of this
paper, Dr, Halley, in speaking of John Hadley, Esq. VP.R.S, (“to
whom,” as he observes, “we are highly obliged for his having
perfected and brought into common use the reflecting telescope,”)
says—He “has been pleased to communicate his most ingenious
instrument for taking the angles by reflection,” (referring, here, to the
Philos. Trans. No. 420;) “it is more than probable that the same may
be applied to taking angles at sea, with the desired accuracy.”

In Mr. Logan’s account of Mr. Godfrey’s invention, dated June 28,

1734, he says: “Tis now four years since Thomas Godfrey hit on this
improvement; for, his account of it, laid before the (Royal) Society
last winter, in which he mentioned two years, was wrote in 1732; and
in the same year, 1730, after he was satisfied in this, he applied
himself to think of the other, viz. the reflecting instrument, by
speculums for a help in the case of longitude, though ’tis also useful
in taking altitudes: and one of these, as has been abundantly proved
by the maker, and those who had it with them, was taken to sea and
there used in observing the latitudes the winter of that year, and
brought back again to Philadelphia before the end of February 1730–
1, and was in my keeping some months immediately after.”

In Mr, Logan’s prior letter to Dr. Halley (dated May 25, 1732,) he
says, that about eighteen months before, Godfrey told him, “he had
for some time before been thinking of an instrument for taking the
distances of stars by reflecting speculums, which he believed might
be of service “at sea;” and that, soon after, Godfrey shewed him an
instrument, which he had procured to be made, for the purpose.
Thus, the time to which Mr. Logan refers Godfrey’s communication of
his improvement to him, would make its date to be about the month
of November, 1730.

In the Rev. Mr. Vince’s great work, entitled, A Complete System of

Astronomy, (and contained in “A Treatise on Practical Astronomy,” at
the end of the second volume of that work,) is an entire chapter on
“Hadley’s Quadrant;” giving a particular description of the instrument,
with rules for the computations from the observations and
illustrations of them by examples. In this Treatise, the author says,
that the instrument took its name from the “inventor,” John Hadley,
Esq. and observes, that not only the science of navigation is greatly
indebted, to this “incomparable instrument,” but such are its various
uses in astronomy, that it may not improperly be called “a portable
observatory.” Mr. Vince further observes, that in the year 1742, about
ten years after Mr. Hadley’s invention (for so he styles it) was
published, a paper in Sir Issac Newton’s own hand-writing was found
among Dr. Halley’s papers, after the Doctor’s death, containing a
figure and description of an instrument (referring to Philos.
Transactions, No. 465,) not much different in its principle from this of
Hadley. He adds, that as Dr. Halley was alive when Mr. Hadley’s
instrument was shewn to the Royal Society, and he took no notice of
this paper of Sir Isaac Newton, it is probable he did not know there
was such an one. In another part of his work (under the head of The
History of Astronomy, vol. ii. p. 280.) Mr. Vince asserts, that the first
person who formed the idea of making a Quadrant to take angles by
reflection, was Robert Hook; and he was born in 1635. On the whole,
however, the learned author draws this conclusion:—“Both Sir Isaac
Newton and Mr. Hadley therefore seem entitled to this invention.”

Mr. Lalande, speaking of this instrument, says: “Le Quartier de

Reflexion, exécuté en 1731 par Hadley, a donné un moyen facile de
mesurer les distances sur mer, à une minute pris, aussi bien
determiner le lieu de la Lune en mer.” See his Astronomie, vol. iii. p.
654.

From these facts, and a careful examination of the papers

themselves, here quoted and referred to, the scientific reader will be
enabled to decide upon the true merits of the controversy that has so
long subsisted, concerning the respective claims of Godfrey and of
Hadley, to the invention of the instrument that bears the name of the
latter.

Before this subject is dismissed, however, it will not be deemed

improper to add, that the late Dr. John Ewing communicated to the
Am. Philosophical Society an account of an Improvement in the
construction of (what he terms) “Godfrey’s double reflecting
Quadrant,” which he had discovered in the spring or summer of the
year 1767: this will be found in the first volume of the Society’s
Transactions. In the conclusion of this communication, Dr. Ewing
says:—“This improvement of an instrument, which was first invented
and constructed by Mr. Godfrey of this city, and which I do not
hesitate to call the most useful of all astronomical instruments that
the world ever knew, I hope will make it still more serviceable to
mankind.”

This communication to the Society by Dr. Ewing, was made in the

year 1770. In one concerning the comet of that year, and made by
Dr. Rittenhouse about the same time, the instrument to which Dr.
Ewing’s improvement applies, is called Hadley’s Quadrant: but
perhaps Dr. Rittenhouse so named it, in conformity to common
usage.

A36. This I know has been pretended to. But it is easy to make
geometrical conclusions come out as we would have them, when the
data they are founded on, are so uncertain that we may chuse them
as suits our purpose.

A37. This circumstance tends gradually to lessen the variety of the

seasons.

A38. This was Tobias Mayer, who was born at Marbach in the
principality of Wurtemberg, in the year 1723: he rendered himself
celebrated in astronomy, by having calculated the best tables of the
moon, and by an excellent catalogue of stars. He died at Gottingen
in 1762, at the age of thirty-nine years. W. B.

A39. It may happen that any of the planets, about the time they
become stationary, shall describe a loop about some small fixed star,
in such manner as might be easily mistaken for the star making part
of a revolution about the planet. This I suspected to have been the
case with the above observation of Montaigne. But the times set
down do not confirm the suspicion.

A40. See page 320 of the foregoing Memoirs.

A41. See page 154 of the foregoing Memoirs.

A42. Mr. T. T. proceeding on a different supposition, has computed

twenty-seven billions of years necessary for that purpose.
 A43. “The main-wheel, which is fixed on the barrel on which the
cat-gut runs.” Mr. Voight.

A44. “A perpetual rochet is a spring lying between the main-wheel,

and a plate which is so high in diameter as to be nearly of a height
with the bottom of the main-wheel teeth, and is cut with fine teeth all
round, in the shape of a fine saw. A click on an axis is fixed between
the two frame-plates, with a weak spring that forces this click into the
fine saw-teeth, which keeps the plate from moving backwards when
the clock is winding up. This fine rochet-wheel is fixed on the barrel-
arbour or axis, the same as the main-wheel. The barrel-rochet
comes close against the plate of the fine rocket, which has a click
screwed on the front, corresponding with the barrel-rochet, and a
spring above that rochet’s click, which forces that click into the
barrel-rochet’s teeth: it is this that makes the clattering noise, which
is heard when a clock is winding up: There is a middling strong
spring placed between two arms of the cross of the main-wheel, bent
like the space of the two arms between which it acts; and this spring
is as broad as the thickness of the cross-arms. One end of that
spring is fastened to the inside of the fine rochet-plate: the other end
lies on the other cross-arm, and acts on that like a gun-lock
mainspring on the cock-tumbler. When the clock or time is set a
going, and the maintaining power or weight of the fusee or barrel,
this power will raise that spring so far as to resist the maintaining
power, and becomes stationary as long as the time-piece is going;
and when it is wound up, this spring in the main-wheel cross will
expand itself, press on the cross-arm, and force that wheel forward,
with nearly the same power as the maintaining power would give: the
click for the fine-teethed rochet falls into one of those fine teeth, and
keeps that rochet steady, without having the least motion, as long as
the winding-up of the clock continues; and by this means a time-
piece can lose no time in winding up: hence it is called a perpetual
rochet; which requires the most accurate workmanship, in its
construction.” Mr. Voight.

A45. This description is drawn up from two separate accounts of

the instrument, with which the Writer of these Memoirs was
obligingly furnished, in writing, by Robert Patterson and the late
David Rittenhouse Waters, Esquires, of Philadelphia. Mr. Patterson
mentions, that he recollects his having seen the Hygrometer so
described, in Dr. Rittenhouse’s Observatory, about thirty years ago.

A46. The second volume of the Transactions of the American

Philosophical Society contains a letter, written on the 13th of
November, 1780, by Dr. Benjamin Franklin, then in France, to Mr.
Nairne, of London: but it was not communicated to the Society, until
January, 1786.

In that letter, Dr. Franklin suggests to Mr. Nairne (an eminent

optician, and mathematical instrument maker,) the idea of an
Hygrometer made of wood; in preference to metalline instruments,
for the purpose of discovering “the different degrees of humidity in
the air of different countries;”—an idea which occurred to the Doctor,
in consequence of a casual circumstance, mentioned in his letter.

Dr. Franklin supposed “a quick sensibility of the instrument, to be

rather a disadvantage” to it; “since,” says he, “to draw the desired
conclusions from it, a constant and frequent observation day and
night, in each country—when the design is, to discover the different
degrees of humidity in the air of different countries—will be
necessary for a year or years, and the mean of each different set of
observations is to be found and determined.”—“For these reasons,”
continues the Doctor, “I apprehend that a substance which, though
capable of being distended by moisture and contracted by dryness,
is so slow in receiving and parting with its humidity that the frequent
changes in the atmosphere affect it sensibly, and which therefore
should, gradually, take nearly the medium of all those changes and
preserve it constantly, would be the most proper substance, of which
to make an Hygrometer:”—and he believes good mahogany wood to
be that substance. In the concluding part of this letter, Dr. Franklin
says to his correspondent: “I would beg leave to recommend to you
—that you would take a number of pieces of the closest and finest
grained mahogany that you can meet with; plane them to the
thinness of about a line, and the width of about two inches across
the grain, and fix each of the pieces in some instrument that you can
contrive, which will permit them to contract and dilate, and will shew,
in sensible degrees, by a moveable hand upon a marked scale, the
otherwise less sensible quantities of such contraction and dilatation.”

Hence it appears, that Franklin and Rittenhouse conceived an idea

of the same kind, nearly at the same time: but that the latter carried
his invention into practice, three or four years before the theory of
the former, founded on similar principles, had been announced to the
American public, or, as it is believed, was made known to any other
person than Mr. Nairne. W. B.

A47. In a table (in the 2d vol. of Lalande’s Astronomie,) entitled,

“Passages de Mercure sur le Soleil, calculés pour trois siècles par
les nouvelles Tables,” the transit of that planet, above referred to, is
thus set down by Lalande, at Paris; viz.

Year. Conjunct. Mean Geocentric Mid. Semi- Short.

Time. Long. Mean dura. dist.
Time
1776. Nov. 2. 9h10′7″. 7.11°3′36″. 9h49′53″. 0h36′42″. 15′43″.A
W. B.

A48. The calculations are here wanting, in Dr. Smith’s MSS.

A49. Here Dr. Rittenhouse’s ends: The remainder of the

versification is continued by another hand.

A50. He never professed the business of making watches: the first

mechanical occupation he assumed was that of a clock maker, an
employment he pursued many years, in the earlier part of his life. W.
B.

A51. Having, in the preceding note, adverted to the unimportant

error in the text, wherein our Philosopher is stated to have pursued
the employment of a watch-maker, instead of that of a clock-maker; it
becomes necessary to notice, in this place, another mistake, though
likewise an inconsiderable one, into which the liberal and candid
writer of the article, above quoted, has been led. Dr. Rittenhouse’s
Observatory, at Norriton—the place of his original residence and the
seat of his farm-house—was erected prior to the celebrated
“Astronomical Observations” made by him, in the year 1769; which
were those relating to the Transit of Venus over the Sun’s disk, on
the 3d of June in that year. W. B.

A52. The time above referred to, is supposed to have been in the
year 1790 or 1791; though perhaps it may have been somewhat
earlier. Dr. Sproat died in the autumn of 1793. W. B.

A53. An uncle of Copernicus was Bishop of Warmia, (in Ermeland,

a little province of Poland,) and gave him a canonry in his cathedral
of Frawenberg, a city in ducal Prussia, situated on the Frische Haff,
at the mouth of the Vistula: it was there he began to devote himself
to astronomy, at the age of twenty-eight years. His great work, De
Revolutionibus Orbium Cœlestium, was completed about the year
1530: but his apprehensions of meeting with persecution from the
bigotted ignorance of the age, in consequence of the system he
therein promulgated, deterred him from publishing it until thirteen
years after that period; and it is supposed that the agitation of his
mind, occasioned by its appearance in the world, produced the
sudden effusion of blood, which terminated his life on the 24th day of
May, in the year 1543. W. B.
 Transcriber’s Note
In the main sections of the text there are many
numbered textual notes, many quite lengthy, which the
writer chose to keep as close as possible to their
references in the text. In the printed book, this resulted in
many pages containing only two lines of the main text.
The writer acknowledges this in the Preface, but points
out the need to keep the notes as close to their
references as possible. Many of these notes have
footnotes of their own, denoted with the traditional *, †, ‡
symbols.

Notes in the Introduction and Appendix also employ

those traditional symbols, which have been resequenced
for the sake of uniqueness. The three notes in the
Introduction become I1, I2, I3, and those in the Appendix
become A1, A2, A3, ... An. If a note is itself footnoted,
that note is indicated as ‘Ana’, etc.

The main text employs 386 numeric notes which

started with ‘1’ for each section. These have been
resequenced across the entire text, again for the sake of
uniqueness. Many notes had footnotes of their own,
denoted with those traditional symbols. These have have
been resequenced as ‘na’, ‘nb’, ‘nc’, etc., where ‘n’ is the
note number. Those notes are placed following the note.

Any internal references to the notes, of course, were

modified to employ the new sequence.

In this version, footnotes have been collected at the

end of the text, and are linked for ease of reference.

Given the publication date (1813), spelling remained

somewhat fluid. So, especially in quoted text, the text
mostly remains as printed unless it is very obviously a
typo (e.g. ‘celebratrd’, or ‘inhahitants’), or where there is
a great preponderance of another variant of a word
elsewhere. There were two instances of a missing ‘of’
which may have been in error.

131.31 The making [of] good Sic

mathematical instruments
145.11 on the fourth day [of] July, Sic
1760.

A quoted translation in note 38 ends abruptly with ‘and

spreads her light:’ (lvi.29) without a closing quotation
mark. This has been amended as ‘spreads her light[.”]’

On two pages (pp. 134, 135), ‘Galileo’ is printed as

‘Gallileo’ (134.33, 134.37 and 135.3), which we take to
be a printer’s lapse.

On p. 182, The ’Rudolphine’ Tables are misspelled two

ways (182.27, 182.29). Both are corrected.

On pp. 327-329, the symbol for Uranus (♅) as printed

is not quite the same as the symbol available to us. In
the text, the small circle is on the top.

Other errors, deemed most likely to be the printer’s,

have been corrected, and are noted here. The
references are to the page and line in the original.

xii.15 not be deemed Replaced.

pre[p/s]umptuous
xxxii.28 the [sun] stood still in See Note
the centre
xxxix.16 Pyth[oga/ago]ras Transposed.
xlvii.4 of his Physics.[”]) Removed.
li.9 Pronaque cum spectent Replaced.
an[a/i]malia
lii.3 he may be enabled Replaced.
t[e/o] know himself
lvii.12 Hyberni[./,] vel quæ Replaced.
tardis
lxii.9 and [security] of See Note
navigation
lxxii.1 wa[n/s] Johannes de Replaced.
Sacro-Bosco
lxxiv.17 for its truth than novelty; Replaced.
[”]
91.11 purer morality and Replaced.
sounder [s/p]olicy.
104.22 to his friend[s]’s little Removed.
library
105.7 personally acquain[t]ed Inserted.
with him
107.1 [in]asmuch as the Restored.
instruments
107.7 [“]It is observable Removed.
110.18 so long distinguis[n/h]ed Replaced.
122.13 Astronomer’s innate Replaced.
ge[u/n]ius
140.12 A descript[t/i]on of Replaced.
148.35 with our guns.[’/”] Replaced.
149.10 as f[o/a]r as the Replaced.
barracks
164.10 and these,[”] Added.
177.30 la mesure du temps.[’/”] Replaced.
184.1 by William Sm[ti/it]h Transposed.
185.3 one-hundredth part of[ Removed.
of] the whole
192.15 See Laland[e]’s Astron. Inserted.
198.16 it has never been done. Removed.
 [”]
198.17 [“]I send you a Added.
description
207.7 good quality and Inserted.
wor[k]manship
207.24 the gl[s/a]ss-works have Replaced.
not
219.25 three [hun]hundred Removed.
pounds
220.25 reached this country[;/,] Replaced.
226.25 History of the Inverted.
America[u/n] Revolution
249.22 the repeated Removed.
occas[s]ions
251.16 Pennsyl[e/v]ania would Replaced.
not yield
254.1 in the ex[u/e]cution of Replaced.
his trust
260.13 of this Anti-Newtonian Replaced.
essayist[:/.]
261.4 Those of anoth[o/e]r Replaced.
cast
262.2 at one of your Transposed.
brothers[,’/’,]
269.7 most embar[r]assing Inserted.
circumstances
303.10 26th of January, 1[726- Replaced
7/627]
344.8 dated “Philadelphia, Oct. Added.
14, 1787[”]
360.20 The agency of Replaced.
i[m/n]formation
367.10 annexed to that statio[n.] Added.
372.30 to the Linn[e/æ]an Replaced.
 system
375.24 that Linn[e/æ]us Replaced.
pronounced him
388.18 on such occa[r/s]ions Replaced.
400.22 precisely the reverse.[”] Removed.
420.22 Mr. Ceracchi became Removed.
embarr[r]assed
455.34 Professor of Eng[g]lish Removed.
458.13 Mr. Ritten[ten]house Removed.
was not himself
477.19 [“]Observations on a Removed.
Comet
495.20 classical learning,[”] Added.
498.2 different systems of Removed.
theology.[”]
508.17 will be annihilated[:/.] Replaced.
512.12 of the human mind.[”] Removed.
513.24 the inha[h/b]itants of the Replaced.
British colonies
519.1 that Dr. Ritten[ten]house Removed.
533.23 the language of Dr. Added.
Reid, [“]fruitful
534.5 [“/‘]In God we live, and Replaced.
move,
534.6 and have our being.[’]” Inserted.
548.8 Venus a[u/n]d Mercury Inverted.
551.22 which jug[g]ling Inserted.
impostors
557.25 in the year 1260[,/.] Replaced.
558.42 by other e[n/m]inent Replaced.
astro[t/n]omers
564.18 their phases f[o/r]om full Replaced.
to new