Fundamentals of Taxation 2017 Edition 10Th Edition Cruz Solutions Manual Full Chapter PDF

Fundamentals of Taxation 2017 Edition
10th Edition Cruz Solutions Manual

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Solutions Manual
CHAPTER 9 – SOLUTIONS
END OF CHAPTER MATERIAL
Discussion Questions
1. A taxpayer has $2,000 of qualified employment-related expenses paid on behalf of

one qualifying child. Determine the maximum and minimum amount of child and
dependent care tax credit available to the taxpayer and explain the circumstances in
which the maximum and minimum credit would be permitted.
Answer:
The maximum credit is 35% of qualified expenses ($700 in this case) and is
available if the AGI of the taxpayer is $15,000 or less. The minimum credit is
20% of qualified expenses ($400) and can be taken if the taxpayer’s AGI is
$43,001 or more.
Learning Objective: 09-01
Topic: Credit for Child and Dependent Care Expenses
Difficulty: 1 Easy
EA: Yes
2. Briefly explain the requirements that must be met to receive a tax credit for child and
dependent care expenses.
Answer:
A taxpayer must incur child-care expenses for one or more qualifying
individuals. Those expenses must be incurred so that the taxpayer can be
gainfully employed or look for work. The taxpayer must also maintain a
household that includes the qualifying individual(s). A qualifying individual is
either a dependent under age 13 or is a dependent or a spouse of any age who
is incapable of caring for him or herself.
Difficulty: 2 Medium
EA: Yes
3. For purposes of the tax credit for child and dependent care expenses, explain the
limitations concerning the amount of qualified expenses that can be used to calculate the
credit.
Answer:
© 2017 by McGraw-Hill Global Education Holdings, LLC. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or
posted on a website, in whole or part.
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Employment-related expenses are limited to $3,000 if there is one qualifying

individual and $6,000 if there are two or more qualifying individuals. These
amounts are further limited to the amount of earned income of the taxpayer
(or spouse, whichever is smaller).
EA: Yes
4. A taxpayer maintains a household and is entitled to a dependency exemption for an

incapacitated adult child. The child lives during the week at an adult day care center and
on the weekends at home with the taxpayer. The taxpayer pays a fee to the center so the
taxpayer can be gainfully employed. Does the fee qualify for treatment as a qualifying
expense for purposes of the child and dependent care tax credit? Why or why not?
Answer:
No. The Internal Revenue Code requires the incapacitated adult child to live
in the taxpayer’s household for at least 8 hours per day. If the child were to go
back to the taxpayer’s house at night for at least 8 hours, the fee would be a
qualifying expense. In this case, since the child was at home only on the
weekends, the costs do not qualify.
EA: Yes
5. To determine the amount of credit for the elderly or the disabled, the appropriate base
amount must be adjusted by the effect of two items. What are those two items, and in
what way is the base amount adjusted?
Answer:
The base amount ranges between $3,750 and $7,500, depending on the filing
status of the taxpayer. This amount must be reduced by (1) the amount of
non-taxable Social Security payments received and (2) one-half of the amount
that AGI exceeds $7,500 for single returns, $10,000 for joint returns, or $5,000
for married filing separately.
Topic: Credit for the Elderly or the Disabled
EA: No
6. Two kinds of education tax credits are available. Name them and briefly discuss the
criteria necessary to claim each of the credits.
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Answer:
The two credits that are available are the American opportunity tax credit
(AOTC, also known as the Hope credit) and the lifetime learning credit. They
are available to taxpayers who pay qualified higher education expenses for the
taxpayer, spouse, or dependent.
Topic: Education Credits
Difficulty: 1 Easy
EA: Yes
7. Explain what qualifies as education expenses for the purposes of educational tax
credits.
Answer:
Qualifying education expenses are amounts paid for tuition, fees, and other
related expenses paid to an eligible educational institution while pursuing
undergraduate, graduate or vocational degrees. These expenses include
books, supplies and other course materials but not room and board. For
lifetime learning credit, expenses paid for books and course materials must be
paid to the institution as a requirement for enrollment and attendance to
qualify.
EA: Yes
8. Jerome is single and cannot be claimed by anyone as a dependent. He is a student at a

local university enrolled full-time in an MBA program. His tuition bill was $5,000. He
paid the bill by withdrawing $2,000 from his savings account and borrowing the
remainder from a local bank. For purposes of the educational tax credits, what is the
amount of Jerome’s qualifying expenses?
Answer:
His qualifying expenses are $5,000. The fact that Jerome borrowed some of
the tuition payment does not disqualify the amount.
EA: Yes
9. Briefly explain when and how each of the two education credits is phased out.
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Answer:
Both the American opportunity tax credit (AOTC) and the lifetime learning
credit phase out when the modified AGI exceeds certain limits. For the
AOTC, the phase out begins when modified AGI exceeds $80,000 and
$160,000, for single and joint taxpayers, respectively. For the lifetime
learning credit, the phase out begins when modified AGI exceeds $65,000 and
$130,000, for single and joint taxpayers, respectively.
EA: Yes
10. Explain the two instances in which taxpayers may choose to deduct foreign taxes as
an itemized deduction rather than as a credit.
Answer:
One instance is when a taxpayer has income from one country and an equal
loss from another country. Another instance is when foreign taxes paid are
not based on income (e.g., property taxes).
Topic: Foreign Tax Credit
EA: No
11. Explain how the foreign tax credit limitation works.
Answer:
U.S. taxpayers pay U.S. taxes on their worldwide income. A credit is
permitted for foreign taxes paid on foreign income. The credit cannot exceed
the amount of U.S. tax that is owed on that foreign income. For example, if an
item of foreign income is taxed at a 20% rate, and that same income is taxed in
the U.S. at a 25% rate, the entire amount of foreign tax would be allowed as a
credit. However, if the foreign income were taxed in the U.S. at a 17% rate,
the credit would be limited to the amount of U.S. tax. Thus, the foreign tax
credit is equal to the lesser of the foreign tax or the U.S. tax.
EA: No
12. Taxpayers can claim a child tax credit for a qualifying child. Define qualifying child.
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Answer:
A qualifying child is a son or daughter, or descendant of either, a stepson or
stepdaughter, or descendent of either, a brother, sister, stepbrother, stepsister
or descendent of any of these, or a foster child whom the taxpayer can claim as
a dependent (based on definition of qualifying child for the dependency
exemption rules). The qualifying child must also be a U.S. citizen or resident,
under the age of 17 at the end of the tax year, younger than the person
claiming the credit and be unmarried.
Topic: Child Tax Credit
EA: Yes
13. Paul and Olivia filed a joint tax return and reported modified AGI of $92,000. They
have two qualifying children for the purposes of the child tax credit. What is the amount
of their child tax credit? What is the amount of their credit if their modified AGI was
$112,000?
Answer:
With a modified AGI of $92,000, Paul and Olivia are entitled to a $1,000 tax
credit for each child, for a total of $2,000.
For a joint return, the credit is reduced by $50 for each $1,000, or fraction
thereof that modified AGI exceeds $110,000. With a modified AGI of
$112,000, Paul and Olivia exceed the limitation by two $1,000 increments.
Thus, their credit is reduced by $100 ($50 X 2), for a total credit of $1,900.
EA: Yes
14. Explain the limitations pertaining to the retirement savings contributions credit.
Answer:
The credit is based on contributions to certain retirement accounts of up to
$2,000. The credit is a percentage (50% or 20% or 10%) of the contribution.
The percentage varies depending on the modified AGI of the taxpayer and
his/her filing status. For tax year 2016, no credit is given (i.e., the credit is
completely phased out) if the modified AGI is over $61,500 for a joint return,
$46,125 for head of household, and $30,750 for all other returns.
Topic: Retirement Savings Contributions Credit
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EA: Yes
15. Leonardo’s filing status is head of household. He has modified Adjusted Gross
Income of $28,000, and he made a $3,000 contribution to his IRA. What is the amount
of his retirement savings contributions credit? What would the credit be if he had a filing
status of single?
Answer:
Leonardo will receive a retirement savings contribution credit of $400. This is
calculated as the $2,000 maximum contribution multiplied by the applicable
percentage of 20%. If Leonardo were filing as a single person, his credit
would be $200 because at modified AGI of $28,000, the applicable percentage
is 10%.
EA: Yes
16. What limitations are associated with the adoption credit, both in terms of dollar
amounts and eligibility?
Answer:
The adoption credit is 100% of qualified adoption expenses paid or incurred
up to a maximum credit of $13,460 per eligible adopted child. The eligible
adopted child must be under age 18 or be incapable of caring for him or
herself. The child of an individual’s spouse is not eligible. The credit phases
out starting at modified AGI of $201,920.
Topic: Adoption Credit
EA: No
17. In the case of the adoption credit, what special rules apply when adopting a child
who is a child with special needs?
Answer:
A child with special needs is a U.S. citizen or resident with a special factor or
condition such that a U.S. state determines the child cannot be placed with
adoptive parents without providing adoption assistance. In case of an
adoption of a child with special needs, a taxpayer can take the maximum
adoption credit regardless of the actual expenses incurred.
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EA: No
18. In the case of the adoption credit, what special rules apply when adopting a child
who is a citizen of another country?
Answer:
If the child is not a U.S. citizen or resident, the credit is allowed only in the
year in which the adoption becomes final (or in a later year if the expenses are
paid in the later year). The credit is not available for a child with special
needs who is not a U.S. citizen or resident.
EA: No
19. What is the definition of qualifying child for purposes of the Earned Income Credit?
Answer:
A qualifying child is either (a) the taxpayer’s son or daughter or descendant of
either, (b) a stepson or stepdaughter or descendant of either, (c) a child who
has been adopted, or (d) an eligible foster child. The child must live with the
taxpayer for more than half the year and must be under age 19 or a full-time
student under age 24 at the end of the tax year or be permanently and totally
disabled. In addition, the child cannot be claimed as a dependent of another,
be a nonresident alien for any part of the year, must be younger than the
person claiming the child and not have filed a joint return.
Topic: Earned Income Credit
EA: Yes
20. Briefly explain the difference between a refundable and a nonrefundable tax credit
and give three examples of tax credits that may be refundable (or partly refundable)
discussed in this chapter.
Answer:
Tax credits reduce the amount of tax liability of a taxpayer. If tax credits
exceed the amount of tax liability of the taxpayer and the excess is as a result
of a refundable tax credit, then taxpayer will receive the excess as a refund.
This is known as a refundable tax credit. Non-refundable tax credits can only
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reduce a taxpayer’s tax liability to zero but cannot be refunded, even if it

exceeds the liability. The three types of credits discussed in the chapter that
may be refundable tax credits are the EIC, American opportunity tax credit
and child tax credit. Each of these credits has a different maximum amount
per credit.
EA: Yes
21. Briefly explain the purpose of the premium tax credit.
Answer:
The premium tax credit is designed to help lower-income taxpayers pay for
health insurance required under the Affordable Care Act. If a taxpayer
purchased insurance through the Marketplace and if the household income is
between 100% and 400% of the Federal Poverty Level, the taxpayer may be
eligible for a tax credit that can be used to pay for a portion of the health
insurance premium.
Topic: Premium Tax Credit
EA: Yes
22. The amount of the premium tax credit is the lesser of what two factors?
Answer:
The premium tax credit is the lesser of:
• The premium for the insurance obtained from the Marketplace
• The premium for the applicable second lowest cost silver plan (SLCSP)
minus the taxpayer’s contribution amount.
EA: Yes
Multiple Choice
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23. Jamison is a single dad with two dependent children, Zoey, age 7 and Conner, age 3.
He has an AGI of $69,000 and paid $4,300 to a qualified day care center for the two
children. What amount can Jamison receive for the child and dependent care credit?
a. $4,300.
b. $1,505.
c. $860.
d. $430.
Answer: c
Feedback: $4,300 x .2 = $860.
Difficulty: 2 Easy
EA: Yes
24. Allie and Buddy are married, file a joint return, and have one son, Zack, age 5.
Buddy has earned income of $42,000 and Allie was a full-time student for 8 months (with
no income). They paid a qualified child care center $3,450. How much is Allie and
Buddy’s child and dependent care credit for the year?
a. $0.
b. $420.
c. $630.
d. $725.
Answer: b
Feedback: $250 x 8 months x .21 = $420.
EA: Yes
25. Avril and John are ages 70 and 72, respectively, and file a joint return. They have an
AGI of $18,000 and received $1,000 in nontaxable Social Security benefits. How much
can Avril and John take as a credit for the elderly or the disabled?
a. $2,700.
b. $1,000.
c. $525.
d. $375.
Answer: d
Feedback: [$7,500 – $1,000 – (1/2 [$18,000-$10,000])] x .15 = $375.
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EA: No
26. Dennis and Vera are ages 69 and 59, respectively, and file a joint return. They have
an AGI of $28,000 and received $2,000 in nontaxable Social Security benefits. How
much can Dennis and Vera take as a credit for the elderly or the disabled?
a. $0.
b. $1,125.
c. $2,000.
d. $7,500.
Answer: a
Feedback: Because Vera is 59 years old, Dennis is the only qualifying taxpayer.
[$5,000 – $2,000 – (1/2 [$28,000-$10,000])] = ($6,000) and therefore, the credit is $0.
EA: No
27. Nathan paid $2,750 in qualifying expenses for his daughter who attended a
community college. How much is Nathan’s lifetime learning credit without regard to
AGI limitations or other credits?
a. $250.
b. $550.
c. $825.
d. $1,375.
Answer: b
Feedback: $2,750 x .2 = $550.
Difficulty: 1 Easy
EA: Yes
28. DJ and Gwen paid $3,200 in qualifying expenses for their son, Nikko, who is a
freshman attending the University of Colorado. DJ and Gwen have AGI of $170,000 and
file a joint return. What is their allowable American opportunity tax credit (AOTC) after
the credit phaseout based on AGI is taken into account?
a. $0.
b. $1,150.
c. $2,300.
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d. $3,200.
Answer: b
Feedback: $2,000+ [($3,200-$2,000) * .25] = $2,300 is their pre-limitation credit; but
limited due to AGI as: $2,300 *[($180,000 – $170,000)/$20,000] = $1,150.
Difficulty: 1 Easy
EA: Yes
29. Darren paid the following expenses during November 2016 for his son Sean’s
college expenses for spring 2017 semester, which begins in January 2017:
Tuition $12,000
Housing 8,000
Books 1,500
In addition, Sean’s uncle paid $500 in fees on behalf of Sean directly to the college. Sean
is claimed as Darren’s dependent on his tax return. How much of the above paid
expenses qualify for the purpose of the American opportunity tax credit deduction for
Darren in 2016?
a. $12,000.
b. $13,500.
c. $14,000.
d. $22,000.
Answer: c
Feedback: $12,000 +$1,500+ $500 = $14,000.
EA: Yes
30. Which of the following expenses are qualifying expenses for purposes of the
education credits?
a. Books (purchased at the institution as a condition of enrollment).
b. Tuition.
c. Room and Board.
d. Both (a) and (b).
Answer: d
Feedback: Books and tuition are qualifying expenses for the education credits.
Room and board however, are not qualifying expenses for the purposes of education
credits deduction.
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Difficulty: 1 Easy
EA: Yes
31. Which of the following conditions must be met for a taxpayer to be able to claim the
foreign tax credit (FTC) without filing Form 1116?
a. All of the foreign-source income is passive income.
b. All of the foreign-source income was reported on Form 1099.
c. Total foreign taxes paid were less than $300 (or $600 if married filing jointly).
d. All of the above must be met to claim the FTC without Form 1116.
Answer: d
Feedback: All of the conditions must be met to claim FTC without the Form 1116.
Difficulty: 1 Easy
EA: No
32. Joyce has $82,000 total worldwide income, which includes $11,000 of taxable
income from China. She paid $2,200 in foreign income taxes to China, and her U.S. tax
liability is $21,610. Joyce’s foreign tax credit is:
a. $0.
b. $2,200.
c. $2,899.
d. $11,000.
Answer: b
Feedback: $11,000/$82,000 x $21,610=$2,899; $2,899 > $2,200; so the credit is
$2,200.
EA: No
33. Michael paid $3,350 in foreign income taxes to Argentina. His total worldwide
income was $75,000, which included $9,800 of income from Argentina. His U.S. tax
liability is $18,750. How much can Michael claim as a foreign tax credit?
a. $2,450.
b. $2,800.
c. $3,350.
d. $15,400.
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Answer: a
Feedback: $9,800/$75,000 x $18,750=$2,450; $2,450<$3,350; so the credit is limited
to $2,450.
EA: No
34. Under which of the following situations would a taxpayer most likely take the
foreign taxes paid as an itemized deduction rather than as a foreign tax credit?
a. The foreign tax paid was less than 15%.
b. The foreign tax paid was to a European country.
c. The foreign tax paid was a property tax.
d. The foreign tax paid was a tax on dividend income.
Answer: c
Feedback: The foreign tax credit is only available for foreign taxes paid based on
income. Therefore, foreign taxes paid based on property value can only be deducted
as an itemized deduction.
EA: No
35. Justin and Janet, whose AGI is $156,000, have twin boys, Jake and Jaime, age 5.
How much child tax credit can they take?
a. $0.
b. $1,000.
c. $2,000.
d. $2,300.
Answer: a
Feedback: ($156,000-$110,000) =$46,000/$1,000 x $50=$2,300; $2,300>$2,000 so
therefore, $0 credit.
EA: Yes
36. Julian is a single father with a son, Alex, who is 8 years old. If Julian’s AGI is
$87,000, what is his child tax credit for Alex?
a. $0.
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b. $400.
c. $600.
d. $1,000.
Answer: b
Feedback: ($87,000-$75,000) =$12,000/$1,000 x $50=$600; $1,000-$600 = $400
credit.
EA: Yes
37. Jerry and Ellen are married filing jointly with AGI of $45,000. They made a $1,500
contribution to a qualified retirement plan. How much is their retirement savings
contributions credit?
a. $0.
b. $150.
c. $300.
d. $750.
Answer: b
Feedback: $1,500 x .10 = $150.
EA: Yes
38. Marcia is a single filer and has AGI of $26,000. During the year, she contributed
$800 to a Roth IRA. What amount of retirement savings contributions credit can Marcia
take?
a. $0.
b. $80.
c. $160.
d. $800.
Answer: b
Feedback: $800 x .10 = $80.
EA: Yes
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39. After two and one-half years of working with the orphanage and the government,
Jake and Nikki adopted a little girl from Korea. The adoption process, which became
final in January 2016, incurred the following qualified adoption expenses. How much
and in which year can Jake and Nikki take the adoption credit? (Assume no limitation of
the credit due to AGI.)
Year 2015 $6,000

Year 2016 $1,000
a. $6,000 in 2015.
b. $1,000 in 2016.
c. $7,000 in 2015.
d. $7,000 in 2016.
Answer: d
Feedback: For foreign adoptions, credit is only allowed in the year in which the
adoption becomes final.
EA: No
40. Abel and Loni adopted a boy (a U.S. citizen), during the current tax year and
incurred a total of $14,675 in qualified adoption expenses. Abel and Loni have modified
AGI of $225,000. What is the amount of adoption credit they can take?
a. $5,694.
b. $7,766.
c. $13,460.
d. $14,675.
Answer: a
Feedback: [($241,920 - $225,000)/$40,000] x $13,460 = $5,694.
EA: No
41. Juan and Lydia both work, file a joint return, and have one qualifying child. They
have AGI of $17,000. What is their EIC?
a. $506.
b. $3,373.
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c. $5,440.
d. $9,920.
Answer: b
Feedback: $3,373; no phase out
EA: Yes
42. Thomas and Stephani are married with four qualifying children. Their AGI is
$24,500. Calculate their EIC using the EIC formula.
a. $5,160.
b. $5,509.
c. $6,109.
d. $6,269.
Answer: c
Feedback: $6,269 – [($24,500-$23,740) x .2106] = $6,109.
EA: Yes
43. Which of the following credits is never a refundable credit?

a. Earned Income Credit
b. Foreign Tax Credit
c. Child tax credit
d. American opportunity tax credit
Answer: b
Feedback: All of the other choices above may be fully or partially refundable.
Difficulty: 1 Easy
EA: No
44. Which of the following statements is incorrect?

a. Taxpayers who purchased qualified health insurance through the Marketplace may be
eligible for a premium tax credit.
b. Taxpayers must apply the credit towards their health insurance premium.
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c. The premium tax credit is designed to help eligible taxpayers pay some of their health
insurance premium.
d. Taxpayers who receive a credit must file a federal tax return and attach Form 8962.
Answer: b
Feedback: Taxpayers can choose to apply the credit towards their health insurance
premium OR may choose to receive the entire credit when they file their tax return.
Difficulty: 1 Easy
EA: Yes
45. Dwayne is single with one dependent. He enrolled in a qualified plan through the
Marketplace at a cost of $4,200 per year. His household income was $40,000. The
SLCSP premium is $4,700. What is Dwayne’s premium tax credit?
a. $1,416
b. $3,284
c. $4,200
d. $4,700
Answer: a
Feedback: Dwayne’s household income is 251% of the Federal Poverty Level for a
household of two [$40,000 / $15,930 = 251%]. His factor from Appendix B is .0821.
His contribution amount is $40,000 X .0821 = $3,284.
His premium tax credit is the lesser of:
• His health care premium of $4,200
• His SLCSP cost of $4,700 minus his contribution amount of $3,284, or
$1,416.
Thus, his premium tax credit is $1,416.
Difficulty: 3 Hard
EA: Yes
Problems
46. Tim and Martha paid $7,900 in qualified employment-related expenses for their three
young children who live with them in their household. Martha received $1,800 of
dependent care assistance from her employer, which was properly excluded from gross
income. The couple had $57,000 of AGI earned equally. What amount of child and
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dependent care tax credit can they claim on their Form 1040? How would your answer
differ (if at all) if the couple had AGI of $36,000 that was earned entirely by Tim?
Answer:
The amount of employment-related expenses is limited to $6,000 for two or
more children. This amount must be reduced by the $1,800 that Martha
received from her employer. Thus, their allowed expenses are $4,200. Since
their AGI was over $43,000, Tim and Martha are entitled to a credit equal to
20% of their expenses, or $840.
If the couple had AGI of $36,000 earned by solely Tim, the credit would be
zero. The credit is permitted if you have child care expenses incurred to be
gainfully employed. Since Martha was not employed, no credit is permitted.
Allowed expenses are limited to the earned income of the taxpayer or the
taxpayer’s spouse, whichever is smaller.
Difficulty: 3 Hard
EA: Yes
47. Adrienne is a single mother with a 6-year-old daughter who lived with her during the
entire year. Adrienne paid $2,900 in child care expenses so that she would be able to
work. Of this amount, $500 was paid to Adrienne’s mother whom Adrienne cannot claim
as a dependent. Adrienne had net earnings of $1,900 from her jewelry business. In
addition, she received child-support payments of $21,000 from her ex-husband. What
amount, if any, of child and dependent care tax credit can Adrienne claim?
Answer:
The payment to Adrienne's mother is a permitted child-care expense. The
amount of employment-related expense is limited to the lesser of $3,000 (in
the case of one qualifying child) or the amount of earned income. Here,
Adrienne's expense amount is limited to $1,900 - the amount of her earned
income from her business. Child support received, for the purposes of the
child care credit, is not considered earned income nor is it used to determine
the amount of AGI for this credit. Therefore, Adrienne is entitled to a credit
percentage of 35% based on her AGI of $1,900. Adrienne is entitled to a
child and dependent care tax credit of $665 ($1,900 x .35).
Difficulty: 3 Hard
EA: Yes
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48. What is the AGI limit above which each the following taxpayers would not be
eligible to receive a credit for the elderly or the disabled?
a) A single taxpayer eligible for the credit who receives $1,000 of nontaxable
social security benefits.
b) Taxpayers filing a joint return for which one taxpayer is eligible for the credit
and the taxpayers have received no taxable social security benefits.
c) Taxpayers filing a joint return and both are eligible for the credit and received
$3,000 of nontaxable social security benefits.
Answer:
In each case, you are trying to determine when the base amount goes to zero.
The base amount is $3,750 for married filing separately, $7,500 for joint
returns where both spouses qualify, or $5,000 for single returns or joint
returns where only one spouse qualifies. The base amount must be reduced
by the amount of non-taxable Social Security benefits and by one-half the
amount by which AGI exceeds $7,500 (single), $10,000 (joint), or $5,000
(married filing separately).
To calculate, first determine the base amount and subtract the nontaxable
social security benefits. The resultant number will be half of the required
AGI excess. Then multiply the resultant number by two and add it to the
appropriate AGI amount.
a. Base amount of $5,000 minus $1,000 nontaxable benefits = $4,000 x 2 =
$8,000 + $7,500 AGI lower limit = $15,500. For this example, the credit for
the elderly will be zero when AGI reaches $15,500.
b. Base amount of $5,000 minus $0 nontaxable benefits = $5,000 x 2 =
$10,000 + $10,000 AGI lower limit = $20,000.
c. Base amount of $7,500 minus $3,000 nontaxable benefits = $4,500 x 2 =
$9,000 + $10,000 AGI lower limit = $19,000.
Difficulty: 3 Hard
EA: No
49. Assuming that an AGI limitation does not apply, what amounts of credit for the
elderly or the disabled would be permitted in each of the instances in Problem 48?
Answer:
The credit for the elderly or the disabled is equal to 15% of the allowable
base amount. Since the AGI limit is assumed not to apply, the allowable
amount for this problem is the base amount ($7,500 joint return where both
qualify, $5,000 single return or joint where only one spouse qualifies, or
$3,750 for married filing separately), reduced by the amount of nontaxable
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Social Security benefits. The credit will then be 15% of the resultant
allowable amount.
a. Base amount of $5,000 minus $1,000 nontaxable benefits = $4,000 x .15 =
$600 credit for the elderly or the disabled.
b. Base amount of $5,000 minus $0 nontaxable benefits = $5,000 x .15 = $750
credit for the elderly or the disabled.
c. Base amount of $7,500 minus $3,000 nontaxable benefits = $4,500 x .15 =
$675 credit for the elderly or the disabled.
Difficulty: 3 Hard
EA: No
50. In each of the following cases, certain qualifying education expenses were paid
during the tax year for individuals who were the taxpayer, spouse, or dependent. The
taxpayer has a tax liability and no other credits. Determine the amount of American
opportunity tax credit (AOTC) and/or lifetime learning credit that should be taken in each
instance.
a) A single individual with modified AGI of $32,900 and expenses of $3,400 for a
child who is a full-time college freshman.
b) A single individual with modified AGI of $44,500 and expenses of $3,800 for a
child who is a full-time college junior.
c) A couple, married filing jointly, with modified AGI of $79,300 and expenses of
$8,000 for a child who is a full-time graduate student.
Answer:
a. The AOTC is $2,350 (100% of the first $2,000 and 25% of the remaining
$1,400). Lifetime learning credit is $680 ($3,400 x 20%). The AGI
limitations do not apply. Thus, the $2,350 AOTC should be taken.
b. The AOTC is $2,450 (100% of the first $2,000 and 25% of the remaining
$1,800). Lifetime learning credit is $760 ($3,800 x 20%). The AGI
limitations do not apply. Thus, the $2,450 AOTC should be taken.
c. The AOTC is only permitted in the first four years of college education so
only lifetime learning credit would apply. The lifetime learning credit is 20%
of $8,000 or $1,600. Since AGI limitations do not apply, the total credit that
may be claimed is $1,600.
Difficulty: 3 Hard
EA: Yes
51. Walt and Deloris have two dependent children, Bill and Tiffany. Bill is a freshman
at State University and Tiffany is working on her graduate degree. The couple paid
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qualified expenses of $3,900 for Bill (who is a half-time student) and $7,800 for Tiffany.
What are the amount and type of education tax credits that Walt and Deloris can take,
assuming they have no modified AGI limitation?
Answer:
The American opportunity tax credit (AOTC) is available for students in
their first four years of study who are attending at least half-time.
Therefore, the expenses for Bill are allowed for the AOTC, resulting in a
credit of $2,475. Tiffany is not eligible for the AOTC since she is past her
first four years of postsecondary education. The lifetime learning credit is
20% of up to $10,000 of qualified expenses incurred for study at any
postsecondary level. Thus, Tiffany’s expenses are eligible for a lifetime
learning credit of $1,560. Although Bill also qualifies for a lifetime learning
credit, the AOTC is greater. Both credits cannot be taken for the same
expenses. Thus, Walt and Deloris should claim an AOTC of $2,475 for Bill
and a lifetime learning credit of $1,560 for Tiffany, for a total of $4,035.
Difficulty: 3 Hard
EA: Yes
52. Use the information in Problem 51. What education tax credits are available if Walt
and Deloris report modified AGI of $110,300? Does your answer change if Tiffany is
taking one class a semester (is less than a half-time student) and not taking classes in a
degree program? Why or why not?
Answer:
Since the couple’s modified AGI is less than the lower threshold for the
American opportunity tax credit (AOTC) of $160,000, the AGI limits do not
affect the AOTC for Bill.
The lower threshold for the lifetime learning credit for married filing jointly
however, is $110,000 and completely phases out at $130,000, and therefore,
the credit for Tiffany must be phased out. The fact that Tiffany is not in a
degree program or is attending less than half-time does not affect the answer
since these are not limitations for the lifetime learning credit (although both
are limitations of the AOTC). The credit after phase-out is $1,537 calculated
as follows: $1,560 x [($130,000- $110,300)/$20,000] = $1,537.
Walt and Deloris would take the same amount of AOTC as #51 but the
lifetime learning credit would be limited to only = $1,537.
Difficulty: 3 Hard
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EA: Yes
53. In 2016, Jeremy and Celeste who file a joint return, paid the following amounts for
their daughter, Alyssa, to attend the University of Colorado, during academic year 2016-
2017. Alyssa was in her first year of college and attended full-time:
Tuition and fees (for fall semester 2016) $1,950

Tuition and fees (for spring semester 2017) 1,000
Books 600
Room and board 1,200
The spring semester at University of Colorado begins in January. In addition to the
above, Alyssa’s uncle Devin sent $800 as payment for her tuition directly to the
University. Jeremy and Celeste have modified AGI of $165,000. What is the amount of
qualifying expenses for purposes of the American opportunity tax credit (AOTC) in tax
year 2016? What is the amount of the AOTC that Jeremy and Celeste can claim based on
their AGI?
Answer:
Qualifying expenses for the AOTC total $4,350 ($1,950 + $1,000 + $600 +
$800). Qualifying expenses do not include amounts paid for room and board.
Since Jeremy and Celeste’s modified AGI exceeds $160,000, their AOTC is
$1,875, calculated as follows:
[($180,000 - $165,000)/20,000 x $2,500] = $1,875.
Difficulty: 3 Hard
EA: Yes
54. Jenna paid foreign income tax of $1,326 on foreign income of $8,112. Her
worldwide taxable income was $91,400, and her U.S. tax liability was $23,000. What is
the amount of foreign tax credit (FTC) allowed? What would be the allowed FTC if
Jenna had paid foreign income tax of $2,400 instead?
Answer:
The amount of foreign tax credit is limited to the lesser of foreign tax paid or
[(foreign-source taxable income / worldwide taxable income) x U.S. tax
liability]
In this case, the limitation calculation is ($8,112 / $91,400) x $23,000 = $2,041.

Thus, the amount of foreign tax credit is equal to the $1,326 foreign tax paid,
since it is less.
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If the amount of foreign income tax paid had changed to $2,400, the
limitation calculation above would be less than the tax paid and thus, the
allowed foreign tax credit would be limited to $2,041.
Difficulty: 3 Hard
EA: No
55. Determine the amount of child tax credit in each of the following cases.
a) A single parent with modified AGI of $43,400 and two children.
b) A single parent with modified AGI of $77,058 and three children.
c) A married couple with modified AGI of $107,933 and one child.
Answer:
A taxpayer is entitled to a $1,000 credit for each qualifying child unless
limited by modified AGI. The credit is reduced by $50 for each $1,000, or
fraction thereof, by which modified AGI exceeds $110,000 (married), $75,000
(single), or $55,000 (married filing separately).
a. $2,000. The modified AGI limits do not apply.
b. $2,850. Without regard to the limitation, the person is entitled to a child
tax credit of $3,000. However, modified AGI exceeds the limitation by $2,058
($77,058 - $75,000). Thus, there are three $50 reductions.
c. $1,000. The modified AGI limits do not apply.
Difficulty: 3 Hard
EA: Yes
56. Determine the retirement savings contributions credit in each of the following cases.
a) A married couple filing jointly with modified AGI of $37,500 and an IRA
contribution of $1,600.
b) A married couple filing jointly with modified AGI of $58,000 and an IRA
c) A head of household taxpayer with modified AGI of $33,000 and an IRA
d) A single taxpayer with modified AGI of $12,000 and an IRA contribution of
$2,300.
Answer:
a. $320 ($1,600 x .2)
b. $150 ($1,500 x .1)
c. $200 ($2,000 x .1)
d. $1,000 ($2,000 x .5); maximum contribution is $2,000.
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EA: Yes
57. Niles and Marsha adopted a little boy (a U.S. citizen). They paid $14,500 in 2015
for adoption-related expenses. The adoption was finalized in early 2016. Marsha
received $3,000 of employer-provided adoption benefits. For question (a) assume that
any adoption credit is not limited by modified AGI or by the amount of tax liability.
a. What amount of adoption credit, if any, can Niles and Marsha take in 2016?
b. Using the information in (a), assume that their modified AGI was $205,000 in
2016. What amount of adoption credit is permitted in 2016?
Answer:
In general, a credit is allowed for 100% of adoption expenses (minus any
reimbursements) up to a maximum of $13,460 per child. In this case, all of
the expenses are incurred in the year before the adoption became final. Pre-
final expenses are deductible in the year following payment. In addition, the
total adoption expenses are $14,500, which exceeds the maximum.
Therefore, the maximum allowed amount of $13,460 should be used to
calculate the credit in 2016, the year the adoption was finalized.
a. $ 10,460 of credit is allowed for year 2016 – the maximum amount allowed
of $13,460 minus the $3,000 reimbursement from Marsha’s employer.
b. The year 2016 preliminary credit of $13,460 would be further limited to
$9,655 as follows: [($241,920- $205,000) / $40,000] x $10,460 = $9,655.
Difficulty: 3 Hard
EA: No
58. Determine the amount of Earned Income Credit in each of the following cases.
Assume that the person or persons is/are eligible to take the credit. Calculate the credit
using the formulas.
a) A single person with earned income of $7,554 and no qualifying children.
b) A single person with earned income of $21,500 and two qualifying children.
c) A married couple filing jointly with earned income of $29,190 and one
qualifying child.
Answer:
a. $506; no phaseout.
b. $5,572 – [($21,500-$18,190) x .2106] = $4,875.
c. $3,373 – [($29,190 - $23,740) x .1598] = $2,502.
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Difficulty: 3 Hard
EA: Yes
Tax Return Problems

The solutions to the chapter tax return problems can be found on the online learning
center: www.mhhe.com/cruz2016.
9-25
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no related content on Scribd:
Third Session, Thirty-Seventh Congress.
Excluding Colored Persons from Cars.

In Senate—1863, February 27—Pending a supplement to the
charter of the Washington and Alexandria Railroad Company, Mr.
Sumner offered this proviso to the first section:
That no person shall be excluded from the cars on account of color.
Which was agreed to—yeas 19, nays 18, as follows:
Yeas—Messrs. Arnold, Chandler, Clark, Fessenden, Foot, Grimes,
Harris, Howard, King, Lane of Kansas, Morrill, Pomeroy, Sumner,
Ten Eyck, Trumbull, Wade, Wilkinson, Wilmot, Wilson, of
Massachusetts—19.
Nays—Messrs. Anthony, Bayard, Carlile, Cowan, Davis,
Henderson, Hicks, Howe, Kennedy, Lane of Indiana, Latham,
McDougall, Powell, Richardson, Saulsbury, Turpie, Willey, Wilson
of Missouri—18.
March 2.—The House concurred in the amendment without
debate, under the previous question.
First Session, Thirty-Eighth Congress.
In Senate—1864, February 10—Mr. Sumner offered the following:

Resolved, That the Committee on the District of Columbia be
directed to consider the expediency of further providing by law
against the exclusion of colored persons from the equal enjoyment of
all railroad privileges in the District of Columbia.
Which was agreed to—yeas 30, nays 10.
February 24—Mr. Willey, from the Committee on the District of
Columbia, made this report, and the committee were discharged.
The Committee on the District of Columbia, who were required by
resolution of the Senate, passed February 8, 1864, “to consider the
expediency of further providing by law against the exclusion of
colored persons from the equal enjoyment of all railroad privileges in
the District of Columbia,” have had the matter thus referred to them
under consideration, and beg leave to report:
The act entitled “An act to incorporate the Washington and
Georgetown Railroad Company,” approved May 17, 1862, makes no
distinction as to passengers over said road on account of the color of
the passengers, and that in the opinion of the committee colored
persons are entitled to all the privileges of said road which other
persons have, and to all remedies for any denial or breach of such
privileges which belongs to any person.
The committee therefore ask to be discharged from the further
consideration of the premises.
March 17—The Senate considered the bill to incorporate the
Metropolitan Railroad Company, in the District of Columbia, the
pending question being an amendment, offered by Mr. Sumner, to
add to the fourteenth section the words:
Provided, That there shall be no regulation excluding any person
from any car on account of color.
Which was agreed to—yeas 19, nays 17, as follows:
Yeas—Messrs. Anthony, Brown, Clark, Conness, Fessenden, Foot,
Foster, Grimes, Harlan, Howe, Lane of Kansas, Morgan, Morrill,
Pomeroy, Ramsey, Sumner, Wade, Wilkinson, Wilson—19.
Nays—Messrs. Buckalew, Carlile, Davis, Doolittle, Harding,
Harris, Hendricks, Johnson, Lane of Indiana, Powell, Riddle,
Saulsbury, Sherman, Ten Eyck, Trumbull, Van Winkle, Willey—17.
The bill then passed the Senate.
June 19—The House refused to strike out the proviso last adopted
in the Senate—yeas 60, nays 76.
And the bill passed the House and was approved by the President.
Second Session, Thirty-Seventh Congress.
Colored Persons as Witnesses.

In Senate—Pending the confiscation bill, June 28, 1862.
Mr. Sumner moved these words as an addition to the 14th section:
And in all the proceedings under this act there shall be no
exclusion of any witness on account of color.
Which was rejected—yeas 14, nays 25, as follows:
Yeas--Messrs. Chandler, Grimes, Harlan, Howard, King, Lane of
Kansas, Morrill, Pomeroy, Sumner, Trumbull, Wade, Wilkinson,
Wilmot—14.
Nays—Messrs. Anthony, Browning, Carlile, Clark, Collamer,
Cowan, Davis, Dixon, Doolittle, Fessenden, Foot, Foster, Harris,
Henderson, Lane of Indiana, Nesmith, Pearce, Powell, Sherman,
Simmons, Stark, Ten Eyck, Willey, Wilson of Missouri, Wright—25.
Pending the consideration of the supplement to the emancipation
bill for the District of Columbia,
1862, July 7—Mr. Sumner moved a new section:
That in all the judicial proceedings in the District of Columbia
there shall be no exclusion of any witness on account of color.
Which was adopted—yeas 25, nays 11.
The bill then passed—yeas 29, nays 6; (Messrs. Carlile, Davis,
Kennedy, Powell, Wilson, of Missouri, Wright.)
July 9—The bill passed the House—yeas 69, nays 36. There was no
separate vote on the above proposition.
Pending the consideration in the Senate of the House bill in
relation to the competency of witnesses in trials of equity and
admiralty,
1862, July 15—Mr. Sumner offered this proviso to the first section:
Provided, That there shall be no exclusion of any witness on
account of color. Which was rejected—yeas 14, nays 23.
First Session, Thirty-Eighth Congress.
1864, June 25—Pending the civil appropriation bill, in Committee

of the Whole, Mr. Sumner offered this proviso:
Provided, That in the courts of the United States there shall be no
exclusion of any witness on account of color.
Mr. Buckalew moved to add:
Nor in civil actions because he is a party to or interested in the
issue tried.
Which was agreed to; and the amendment as amended was agreed
to—yeas 22, nays 16.
The Senate subsequently concurred in this amendment—yeas 29,
nays 10.
IN HOUSE.
June 29—The question being on agreeing to the amendment,

Mr. Mallory moved to add this proviso to the section amended in
the Senate:
Provided, That negro testimony shall only be taken in the United
States courts in those States the laws of which authorize such
testimony.
Which was rejected—yeas 47, nays 66.
The amendment of the Senate was then agreed to—yeas 67, nays
48.
COLORED SCHOOLS.
June 8.—The House passed a bill to provide for the public
instruction of youth in Washington city, with an amendment
providing for separate schools for the colored children, by setting
apart such a proportion of the entire school fund as the number of
colored children between the ages of six and seventeen bear to the
whole number of children in the District. The bill, with amendments,
passed both Houses without a division.
On all of these questions of color, the Democrats invariably, on test
votes, were found against any concession of rights to the negro.
These were frequently aided by some Republicans, more
conservative than their colleagues, or representing closer districts
where political prejudices would affect their return to their seats. It
will be observed that on nearly all these questions Senator Charles
Sumner took the lead. He was at that time pre-eminently the Moses
of the colored man, and led him from one right to another through
Senatorial difficulties, which by the way, were never as strong as that
in the House, where Thaddeus Stevens was the boldest champion of
“the rights of the black man.” In the field, rather in the direction of
what should be done with the “contrabands” and escaped slaves, the
Secretary of War, General Cameron, was their most radical friend,
and his instructions were so outspoken that Lincoln had to modify
them. As early as December 1, 1861, General Cameron wrote:
“While it is plain that the slave property of the South is justly
subjected to all the consequences of this rebellious war, and that the
Government would be untrue to its trust in not employing all the
rights and powers of war to bring it to a speedy close, the details of
the plan for doing so, like all other military measures, must, in a
great degree, be left to be determined by particular exigencies. The
disposition of other property belonging to the rebels that becomes
subject to our arms is governed by the circumstances of the case. The
Government has no power to hold slaves, none to restrain a slave of
his liberty, or to exact his service. It has a right, however, to use the
voluntary service of slaves liberated by war from their rebel masters,
like any other property of the rebels, in whatever mode may be most
efficient for the defence of the Government, the prosecution of the
war, and the suppression of rebellion. It is clearly a right of the
government to arm slaves when it may become necessary as it is to
take gunpowder from the enemy. Whether it is expedient to do so is
purely a military question. The right is unquestionable by the laws of
war. The expediency must be determined by circumstances, keeping
in view the great object of overcoming the rebels, re-establishing the
laws, and restoring peace to the nation.
“It is vain and idle for the Government to carry on this war, or
hope to maintain its existence against rebellious force, without
enjoying all the rights and powers of war. As has been said, the right
to deprive the rebels of their property in slaves and slave labor is as
clear and absolute as the right to take forage from the field, or cotton
from the warehouse, or powder and arms from the magazine. To
leave the enemy in the possession of such property as forage and
cotton and military stores, and the means of constantly reproducing
them, would be madness. It is, therefore, equal madness to leave
them in peaceful and secure possession of slave property, more
valuable and efficient to them for war than forage, cotton and
military stores. Such policy would be national suicide. What to do
with that species of property is a question that time and
circumstances will solve, and need not be anticipated further than to
repeat that they cannot be held by the Government as slaves. It
would be useless to keep them as prisoners of war; and self-
preservation, the highest duty of a Government, or of individuals,
demands that they should be disposed of or employed in the most
effective manner that will tend most speedily to suppress the
insurrection and restore the authority of the Government. If it shall
be found that the men who have been held by the rebels as slaves are
capable of bearing arms and performing efficient military service, it
is the right, and may become the duty, of this Government to arm
and equip them, and employ their services against the rebels, under
proper military regulations, discipline and command.
“But in whatever manner they may be used by the Government, it
is plain that, once liberated by the rebellious act of their masters,
they should never again be restored to bondage. By the master’s
treason and rebellion he forfeits all right to the labor and service of
his slave; and the slave of the rebellious master, by his service to the
Government, becomes justly entitled to freedom and protection.
“The disposition to be made of the slaves of rebels, after the close
of the war, can be safely left to the wisdom and patriotism of
Congress. The representatives of the people will unquestionably
secure to the loyal slaveholders every right to which they are entitled
under the Constitution of the country.”
[Subsequent events proved the wisdom of this policy, and it was
eventually adopted by an Administration which proclaimed its policy
“to move not ahead but with the people.”]
President Lincoln and his Cabinet modified the above language so
as to make it read:
“It is already a grave question what shall be done with those slaves
who were abandoned by their owners on the advance of our troops
into southern territory, as at Beaufort district, in South Carolina. The
number left within our control at that point is very considerable, and
similar cases will probably occur. What shall be done with them? Can
we afford to send them forward to their masters, to be by them
armed against us, or used in producing supplies to sustain the
rebellion? Their labor may be useful to us; withheld from the enemy
it lessens his military resources, and withholding them has no
tendency to induce the horrors of insurrection, even in the rebel
communities. They constitute a military resource, and, being such,
that they should not be turned over to the enemy is too plain to
discuss. Why deprive him of supplies by a blockade, and voluntarily
give him men to produce them?
“The disposition to be made of the slaves of rebels, after the close
of the war, can be safely left to the wisdom and patriotism of
Congress. The Representatives of the people will unquestionably
secure to the loyal slaveholders every right to which they are entitled
under the Constitution of the country.”
Secretary Cameron was at all times in favor of “carrying the war
into Africa” and it was this stern view of the situation which
eventually led him to sanction measures which brought him into
plainer differences with the Administration. Lincoln took offense at
the printing of his report before submitting it to him. As a result he
resigned and went to Russia as Minister, on his return being again
elected to the United States Senate—a place which he filled until the
winter of 1877, when he resigned, and his son, J. Donald Cameron,
was elected to the vacancy, and re-elected for the term ending in
1885. General B. F. Butler was the author of the “contraband” idea. A
year later the views of the Administration became more radical on
questions of color, and July 22, 1862, Secretary Stanton ordered all
Generals in command “to seize and use any property, real or
personal, which may be necessary or convenient for their several
commands, for supplies, or for other military purposes; and that
while property may be destroyed for proper military objects, none
shall be destroyed in wantonness or malice.
“Second. That military and naval commanders shall employ as
laborers, within and from said States, so many persons of African
descent as can be advantageously used for military or naval
purposes, giving them reasonable wages for their labor.
“Third. That, as to both property, and persons of African descent,
accounts shall be kept sufficiently accurate and in detail to show
quantities and amounts, and from whom both property and such
persons shall have come, as a basis upon which compensation can be
made in proper cases; and the several departments of this
Government shall attend to and perform their appropriate parts
towards the execution of these orders.”
The manner and language employed by General McClellan in
promulgating this order to the Army of the Potomac, led to his
political differences with the Administration, and in the end caused
him to be the Democratic candidate for President in 1864, against
Lincoln. His language is peculiar and some of it worthy of
presentation as of political importance. He said:
“Inhabitants, especially women and children, remaining peaceably
at their homes, must not be molested; and wherever commanding
officers find families peculiarly exposed in their persons or property
to marauding from this army, they will, as heretofore, so far as they
can do with safety and without detriment to the service, post guards
for their protection.
“In protecting private property, no reference is intended to
persons held to service or labor by reason of African descent. Such
persons will be regarded by this army, as they heretofore have been,
as occupying simply a peculiar legal status under State laws, which
condition the military authorities of the United States are not
required to regard at all in districts where military operations are
made necessary by the rebellious action of the State governments.
“Persons subject to suspicion of hostile purposes, residing or being
near our forces, will be, as heretofore, subject to arrest and
detention, until the cause or necessity is removed. All such arrested
parties will be sent, as usual, to the Provost Marshal General, with a
statement of the facts in each case.
“The general commanding takes this occasion to remind the
officers and soldiers of this army that we are engaged in supporting
the Constitution and the laws of the United States and suppressing
rebellion against their authority; that we are not engaged in a war of
rapine, revenge, or subjugation; that this is not a contest against
populations, but against armed forces and political organizations;
that it is a struggle carried on with the United States, and should be
conducted by us upon the highest principles known to Christian
civilization.”
At this time such were the prejudices of Union soldiers against
negroes, because of growing political agitation in the North, that
many would loudly jeer them when seen within the lines. The feeling
was even greater in the ranks of civilians, and yet Congress moved
along, step by step. The 37th abolished slavery in the District of
Columbia; prohibited it in all the territories; confirmed the freedom
of the slaves owned by those in arms against the government;
authorized the employment of colored men in fortifications, their
enlistment, etc.; and enacted an additional article of war, which
prohibited any officer from returning or aiding the return of any
fugitive slave. These were rapid strides, but not as rapid as were
demanded by the more radical wing of the Republican party. We
have shown that most of them were opposed by the Democrats, not
solidly sure where they were plainly political, but this party became
less solid as the war advanced.
Senator Wilson was the author of the bill to abolish slavery in the
District of Columbia. It excited much debate, and the range of the
speeches covered the entire question of slavery. Those from the
Border States opposed it (a few Republicans and all Democrats) but
some of the Democrats of the North supported it. The vote in the
Senate was 29 for to 6 against. In the House Frank P. Blair, Jr.,
advocated colonization in connection with the bill, but his idea met
with little favor. Crittenden, Wickliffe and Vallandigham were
prominent in opposition. Its most prominent advocates were Stevens
of Pennsylvania, and Bingham of Ohio. The vote was 92 for to 38
against.
The bill of Arnold, of Illinois, “to render freedom national and
slavery sectional,” the leading idea in the platform of the convention
which nominated Lincoln, prohibited slavery in “all the Territories of
the United States then existing, or thereafter to be formed or
acquired in any way.” It was vehemently opposed, but passed with
some modifications by 58 ayes to 50 noes, and it also passed the
Senate.
In the Spring of 1862 General David Hunter brought the question
of the enlistment of colored troops to a direct issue by raising a
regiment of them. On the 9th of June following, Mr. Wickliffe of
Kentucky, succeeded in getting the House to adopt a resolution of
inquiry. Correspondence followed with General Hunter. He
confessed the fact, stated that “he found his authority in the
instructions of Secretary Cameron, and said that he hoped by fall to
enroll about fifty thousand of these hardy and devoted soldiers.”
When this reply was read in the House it was greeted with shouts of
laughter from the Republicans, and signs of anger from the others. A
great debate followed on the amendment to the bill providing for the
calling out of the militia, clothing the President with full power to
enlist colored troops, and to proclaim “he, his mother, and wife and
children forever free,” after such enlistment. Preston King, of New
York, was the author of this amendment. Davis, of Kentucky, and
Carlisle of West Virginia, were prominent Senators in opposition;
while Ten Eyck, of New Jersey, Sherman of Ohio, and Browning of
Illinois sought to modify it. Garrett Davis said in opposition:
“Do you expect us to give our sanction and approval to these
things? No, no! We would regard their authors as our worst enemies;
and there is no foreign despotism that could come to our rescue, that
we would not fondly embrace, before we would submit to any such
condition of things.”
Senator Fessenden of Maine, in advocacy of the amendment, said:
“I tell the President from my place here as a Senator, and I tell the
generals of our army, they must reverse their practices and course of
proceeding on this subject. * * * Treat your enemies as enemies, as
the worst of enemies, and avail yourselves like men of every power
which God has placed in your hands, to accomplish your purpose,
within the rules of civilized warfare.”
The bill passed, so modified, as to give freedom to all who should
perform military service, but restricting liberty to the families of such
only as belonged to rebel masters. It passed the House July 16th,
1862, and received the sanction of the President, who said:—“And
the promise made must be kept!” General Hunter for his part in
beginning colored enlistments, was outlawed by the Confederate
Congress. Hunter followed with an order freeing the slaves in South
Carolina.
In January, 1863, pursuant to a suggestion in the annual report of
Secretary Stanton, who was by this time as radical as his predecessor
in office, the House passed a bill authorizing the President to enroll
into the land and naval service such number of volunteers of African
descent as he might deem useful to suppress the rebellion, and for
such term as he might prescribe, not exceeding five years. The slaves
of loyal citizens in the Border States were excluded from the
provisions of this bill. In the Senate an adverse report was made on
the ground that the resident already possessed these powers.
In January, 1863, Senator Wilson, who was by this time chairman
of the Military Committee of the Senate, secured the passage of a bill
which authorized a draft for the National forces from the ranks of all
male citizens, and those of foreign birth who had declared their
intentions, etc. The bill contained the usual exemptions.
CONFEDERATE USE OF COLORED MEN.
In June, 1861, the rebel Legislature of Tennessee passed this

enlistment bill, which became a law:
Sec. 1. Be it enacted by the General Assembly of the State of
Tennessee, That from and after the passage of this act the Governor
shall be, and he is hereby, authorized, at his discretion, to receive
into the military service of the State all male free persons of color
between the ages of fifteen and fifty, or such numbers as may be
necessary, who may be sound in mind and body, and capable of
actual service.
2. That such free persons of color shall receive, each, eight dollars
per month, as pay, and such persons shall be entitled to draw, each,
one ration per day, and shall be entitled to a yearly allowance each
for clothing.
3. That, in order to carry out the provisions of this act, it shall be
the duty of the sheriffs of the several counties in this State to collect
accurate information as to the number and condition, with the
names of free persons of color, subject to the provisions of this act,
and shall, as it is practicable, report the same in writing to the
Governor.
4. That a failure or refusal of the sheriffs, or any one or more of
them, to perform the duties required, shall be deemed an offence,
and on conviction thereof shall be punished as a misdemeanor.
5. That in the event a sufficient number of free persons of color to
meet the wants of the State shall not tender their services, the
Governor is empowered, through the sheriffs of the different
counties, to press such persons until the requisite number is
obtained.
6. That when any mess of volunteers shall keep a servant to wait
on the members of the mess, each servant shall be allowed one
ration.
This act to take effect from and after its passage.
W. C. Whitthorne,
Speaker of the House of Representatives.
B. L. Stovall,
Speaker of the Senate.
Passed June 28, 1861.

1862, November 2—Governor Joseph E. Brown, of Georgia, issued
a call announcing that if a sufficient supply of negroes be not
tendered within ten days, General Mercer will, in pursuance of
authority given him, proceed to impress, and asking of every planter
of Georgia a tender of one fifth of his negroes to complete the
fortifications around Savannah. This one-fifth is estimated at 15,000.
1863. The Governor of South Carolina in July, issued a
proclamation for 3,000 negroes to work on the fortifications, “the
need for them being pressing.”
THE CHANGING SENTIMENT OF CONGRESS.
In the Rebel House of Representatives, December 29th, Mr.

Dargan, of Alabama, introduced a bill to receive into the military
service all that portion of population in Alabama, Mississippi,
Louisiana, and Florida, known as “Creoles.”
Mr. Dargan supported the bill in some remarks. He said the
Creoles were a mixed-blooded race. Under the treaty of Paris in
1803, and the treaty of Spain in 1810, they were recognized as
freemen. Many of them owned large estates, and were intelligent
men. They were as much devoted to our cause as any class of men in
the South, and were even anxious to go into service. They had
applied to him to be received into service, and he had applied to Mr.
Randolph, then Secretary of War. Mr. Randolph decided against the
application, on the ground that it might furnish to the enemy a
pretext of arming our slaves against us. Some time after this he was
again applied to by them, and he went to the present Secretary of
War, Mr. Seddon, and laid the matter before him. Mr. Seddon
refused to entertain the proposition, on the ground that it did not
come up before him through the military authorities. To obviate this
objection, Gen. Maury, at Mobile, soon afterwards represented their
wishes to the War Department. Mr. Seddon refused the offer of their
services, on the ground that it would be incompatible with the
position we occupied before the world; that it could not be done.
Mr. Dargan said he differed with the Secretary of War. He cared
not for “the world.” He cared no more for their opinions than they
did for ours. He was anxious to bring into service every free man, be
he who he may, willing to strike for our cause. He saw no objection to
employing Creoles; they would form a potent element in our army. In
his district alone a brigade of them could be raised. The crisis had
been brought upon us by the enemy, and he believed the time would
yet come when the question would not be the Union or no Union, but
whether Southern men should be permitted to live at all. In resisting
subjugation by such a barbarous foe he was for employing all our
available force. He would go further and say that he was for arming
and putting the slaves into military service. He was in favor even of
employing them as a military arm in the defence of the country.
1864. The Mayor of Charleston, Charles Macbeth, summons all
slaveholders within the city to furnish to the military authorities
forthwith, one-fourth of all their male slaves between the ages of
fifteen and fifty, to labor upon the fortifications. The penalty
announced, in case of failure to comply with this requisition is a fine
of $200 for every slave not forthcoming. Compensation is allowed at
the rate of $400 a year.
All free male persons of color between the ages of fifteen and fifty
are required to give themselves up for the same purpose. Those not
complying will be imprisoned, and set to work upon the fortifications
along the coast. To free negroes no other compensation than rations
is allowed.
NEGROES IN THE ARMY.
The Richmond press publish the official copy of “An act to increase
the efficiency of the army by the employment of free negroes and
slaves in certain capacities,” lately passed by the Rebel Congress. The
negroes are to perform “such duties as the Secretary of War or
Commanding General may prescribe.” The first section is as follows:
The Congress of the Confederate States of America do enact, That
all male free negroes, and other free persons of color, not including
those who are free under the treaty of Paris, of 1803, or under the
treaty of Spain, of 1819, resident in the Confederate States, between
the ages of eighteen and fifty years, shall be held liable to perform
such duties with the army, or in connection with the military
defences of the country, in the way of work upon the fortifications, or
in government works for the production or preparation of materials
of war, or in military hospitals, as the Secretary of War or the
Commanding General of the Trans-Mississippi Department may,
from time to time, prescribe; and while engaged in the performances
of such duties shall receive rations and clothing and compensation at
the rate of eleven dollars a month, under such rules and regulations
as the said Secretary may establish: Provided, That the Secretary of
War or the Commanding General of the Trans-Mississippi
Department, with the approval of the President, may exempt from
the operations of this act such free negroes as the interests of the
country may require should be exempted, or such as he may think
proper to exempt on the ground of justice, equity or necessity.
The third section provides that when the Secretary of War shall be
unable to procure the services of slaves in any military department,
then he is authorized to impress the services of as many male slaves,
not to exceed twenty thousand, as may be required, from time to
time, to discharge the duties indicated in the first section of the act.
The owner of the slave is to be paid for his services; or, if he be
killed or “escape to the enemy,” the owner shall receive his full value.
Governor Smith, of Virginia, has made a call for five thousand
male slaves to work on the batteries, to be drawn from fifty counties.
The call for this force has been made by the President under a
resolution of Congress.
“CONFEDERATE” LEGISLATION UPON NEGRO

PRISONERS AND THEIR WHITE OFFICERS WHEN
CAPTURED.[27]
1863, May 1—An act was approved declaring that the
commissioned officers of the enemy ought not to be delivered to the
authorities of the respective States, (as suggested in Davis’s
message;) but all captives taken by the Confederate forces ought to
be dealt with and disposed of by the Confederate Government.
President Lincoln’s emancipation proclamations of September 22,
1862, and January 1, 1863, were resolved to be inconsistent with the
usages of war among civilized nations, and should be repressed by
retaliation; and the President is authorized to cause full and
complete retaliation for every such violation, in such manner and to
such extent as he may think proper.
Every white commissioned officer commanding negroes or
mulattoes in arms against the Confederate States shall be deemed as
inciting servile insurrection, and shall, if captured, be put to death,
or be otherwise punished, at the discretion of the court.
Every person charged with an offence made punishable under the
act shall be tried by the military court of the army or corps of troops
capturing him; and, after conviction, the President may commute
the punishment in such manner and on such terms as he may deem
proper.
All negroes and mulattoes who shall be engaged in war or taken in
arms against the Confederate States, or shall give aid or comfort to
the enemies of the Confederate States, shall, when captured in the
Confederate States, be delivered to the authorities of the State or
States in which they shall be captured, to be dealt with according to
the present or future laws of such State or States.
Passage of the Thirteenth Amendment.
The first amendment to the Constitution growing out of the war,

and one of its direct results, was that of abolishing slavery. It was
first introduced to the House December 14th, 1863, by James M.
Ashley of Ohio. Similar measures were introduced by James M.
Wilson, Senators Henderson, Sumner and others. On the 10th of
February, Senator Trumbull reported Henderson’s joint resolution
amended as follows:
“That the following article be proposed to the Legislatures of the
several States, as an amendment to the Constitution of the United
States, which, when ratified by three-fourths of said Legislatures,
shall be valid to all intents and purposes as a part of the said
Constitution, namely:
“Art. 13, Sec. 1. Neither slavery nor involuntary servitude except as
a punishment for crime, whereof the party shall have been duly
convicted, shall exist within the United States, or any place subject to
their jurisdiction.
“Sec. 2. Congress shall have power to enforce this article by
appropriate legislation.”
The Senate began the consideration of the question March 28th,
Senator Trumbull opening the debate in favor of the amendment. He
predicted that within a year the necessary number of States would
ratify it. Wilson of Massachusetts made a long and able speech in
favor. Davis of Kentucky and Saulsbury of Delaware led the
opposition, but Reverdy Johnson, an independent Democratic
Senator from Maryland, surprised all by his bold support of the
measure. Among other things he said:
“I think history will bear me out in the statement, that if the men
by whom that Constitution was framed, and the people by whom it
was adopted, had anticipated the times in which we live, they would
have provided by constitutional enactment, that that evil and that sin
should in some comparatively unremote day be removed. Without
recurring to authority, the writings public or private of the men of
that day, it is sufficient for my purpose to state what the facts will
justify me in saying, that every man of them who largely participated
in the deliberations of the Convention by which the Constitution was
adopted, earnestly desired, not only upon grounds of political
economy, not only upon reasons material in their character, but
upon grounds of morality and religion, that sooner or later the
institution should terminate.”
Senator McDougall of California, opposed the amendment. Harlan
of Iowa, Hale of New Hampshire, and Sumner, made characteristic
speeches in favor. Saulsbury advocated the divine right of slavery. It
passed April 8th, by 38 ayes to 6 noes, the latter comprising Davis
and Powell of Kentucky; McDougall of California; Hendricks of
Indiana; Saulsbury and Riddle of Delaware.
Arnold of Illinois, was the first to secure the adoption in the House
(Feb. 15, 1864,) of a resolution to abolish slavery; but the
Constitutional amendment required a two-thirds vote, and this it was
difficult to obtain, though all the power of the Administration was
bent to that purpose. The discussion began May 31st; the vote was
reached June 15th, but it then failed of the required two-thirds—93
for to 65 against, 23 not voting. Its more pronounced advocates were
Arnold, Ashley, Broomall, Stevens, and Kelly of Pennsylvania;
Farnsworth and Ingersoll of Illinois, and many others. Its ablest
opponents were Holman, Wood, Mallory, Cox and Pendleton—the
latter rallying nearly all of the Democrats against it. Its Democratic
friends were McAllister and Bailey of Pennsylvania; Cobb of
Wisconsin; Griswold and Odell of New York. Before the vote was
announced Ashley changed his vote so as to move a reconsideration
and keep control of the question. At the next session it was passed,
receiving every Republican and 16 Democratic votes, 8 Democrats
purposely refraining, so that it would surely pass.

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1. A taxpayer has $2,000 of qualified employment-related expenses paid on behalf of

Employment-related expenses are limited to $3,000 if there is one qualifying

4. A taxpayer maintains a household and is entitled to a dependency exemption for an

8. Jerome is single and cannot be claimed by anyone as a dependent. He is a student at a

11. Explain how the foreign tax credit limitation works.

Topic: Adoption Credit

reduce a taxpayer’s tax liability to zero but cannot be refunded, even if it

21. Briefly explain the purpose of the premium tax credit.

Topic: Credit for the Elderly or the Disabled

Topic: Education Credits

Year 2015 $6,000

43. Which of the following credits is never a refundable credit?

44. Which of the following statements is incorrect?

Tuition and fees (for fall semester 2016) $1,950

In this case, the limitation calculation is ($8,112 / $91,400) x $23,000 = $2,041.

Learning Objective: 09-06

Tax Return Problems

Excluding Colored Persons from Cars.

In Senate—1864, February 10—Mr. Sumner offered the following:

Colored Persons as Witnesses.

1864, June 25—Pending the civil appropriation bill, in Committee

June 29—The question being on agreeing to the amendment,

CONFEDERATE USE OF COLORED MEN.

In June, 1861, the rebel Legislature of Tennessee passed this

Passed June 28, 1861.

THE CHANGING SENTIMENT OF CONGRESS.

In the Rebel House of Representatives, December 29th, Mr.

NEGROES IN THE ARMY.

“CONFEDERATE” LEGISLATION UPON NEGRO

The first amendment to the Constitution growing out of the war,

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