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Gary earned $97,000 as an executive. Gary, who is single,
supported his half sister, who lives in a nursing home. His half sister had no
income during the year. Gary received the following interest: $400 on City of
Los Angeles bonds, $200 on a money market account, and $2,100 on a loan made to
his brother. Gary spent one week serving on a jury and received $50. Gary
received a refund of federal income taxes withheld during the prior year of
$1,200 and a stare income tax refund of $140. Gary had itemized deductions last
year of $18,000 which included $1,000 of stare income taxes.

Gary received qualified dividends from Ace Corporation of
$1,000 and from Tray Corporation of $1,400. Gary’s itemized deductions equal
$19,000, and withholding for federal income taxes is $14,000. Compute Gary’s
tax due or refund due.

Sally W. £manual, a teacher, had the following dividends and
interest during the current year:
Additional information pertaining to Sally £manual includes
The taxable portion of the pension is $7,000. Sally actively
participates in the rental activity. Other relevant information includes
Address: 430 Rumsey Place, West Falls, California 92699
Occupation: Credit manager
Social Security number: 123-45-6789
Marital status: Single
Complete Sally’s Schedule 1, Schedule Band compute her
taxable income on Form 1040. Assume Schedule E has already been prepared.

Short Tax Fomt. Anne Banks is a single, 60-year old retired
teacher who does not itemize. These forms are found in Figures 1:3-5 and 1:3-6.
Complete page 2 of her Form 1040.

Jim and Linda are your tax clients. They were divorced nvo
years ago, and the divorce decree stated that Jim was to make monthly payments
co Linda. The court designated $300 per month as alimony and $200 per month as
child support, or a tota l of $6,000 per year. Jim has been unemployed for much
of the year and paid Linda $2,000 that he said was for child support. In
addition, Jim transferred the title to a three -year-old automobile with a
$4,000 FMV and basis of $7,000 in exchange for her promise not to pursue any
claim she has against him for the unpaid child support and alimony. Does Linda
have co report any alimony and is Jim entitled to an alimony deduction? Draft a
memo for the file chat discusses the tax consequences for both Jim and Linda.

1. What is meant by the terms administrative exclusion and
judicial exclusion?
2. There is no specific statutory exclusion for welfare
benefits. Nevertheless, the lRS has ruled that such benefits are nor taxable.
ls this within the authority of the lRS?
3. What was the issue in the tax case Eisner v. Macomber?
Why is the case important?