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 Co ntents ~ Individua l s v ii

Co mpliance and Procedura l Consideratio ns 9-47 Inventories 11-11

Substa ntiati ng Travel and Entertainment Expenses 9-4 7 Determination of Inventory Cost 11-1 1
Reporting Employee Business Expenses 9-47 Special Accounting Methods 11-15
Reporting Office in Home Expenses 9-48 Long-Term Contracts 11-15
Qualification of Pension and Profit-Sharing Plans 9-48 Install ment Sales Met hod 11-17
Prob le m Materia ls 9-51 Deferred Payment Sales 11-21
Discussion Questions 9-51 Imputed Int erest 11-22
Issue Identification Questions 9-53 Imputed Interest Computation 11-23
Problems 9-54 Accrual of Interest 11-23
Comprehensive Problem 9-61 Gift, Shareholder, and Other Loans 11-24
Tax Strategy Problem 9-62
Change in Account ing Methods 11-25
Tax Form/Return Preparation Problems 9-62
Amou nt of Change 11-26
Case Study Problems 9-63
Reporting the A1nou nt of t he Change 11-27
Tax Research Problem 9-64
Obtaini ng IRS Consent 11-27
CHAPTER 10 Tax Planning Considerat ions 11-28
... DEPRECIATION, COST RECOVERY, AMORTIZATION, ANO Accounting Periods 11-28
DEPLETION 10-1 Accounting Methods 11-28
Install ment Sales 11-28
Depreciatio n and Cost Reco very 10·2
Genera l Considerations 10-2 Compl iance and Procedural Considerat ions 11-28
Depreciation Methods 10-4 Reporting Installment Sales on Form 6252 11-28
Calculation of Depre.ciation 10-5 Procedures for Changing to LIFO 11-30
MACRS Restrictions 10-12 Problem Materials 11 -30
Amortization 10-17 Discussion Questions 11-30
Sec. 197 Intangibles 10-17 Issue Identification Questions 11-31
Research and Experimental Expenditures 10-19 Problems 11-32
Computer Software 10-20 Comprehensive Problem 11-34
Depletion, Intangi ble Drilli ng and Develop ment Tax Strategy Proble1ns 11-35
Tax Form/Return Preparation Problem 11-35
Costs 10· 21
Case Study Problems 11-35
Depletion Methods 10-22
Tax Research Problems 11-36
Treatment of Intangible Drilling and Development
Costs 10-23
Tax Planning Consi derations 10-24 C H APT E R 1 2
... PROPERTY TRANSACTIONS: NONTAXAflLE
Alternative Depreciation System Under
MACRS 10-24 EXCHANGES 12-1
Use of Units of Production Depre.ciation 10-24 Like-Kind Exchanges 12·2
Structuri ng a Business Combination 10-24 Like-Kind Property Defined 12-2
Compliance a nd Procedural Considerat ions 10-25 A Direct Exchange Must Occur 12-4
Reporting Cost Recovery, Depreciation, Depletion, and Three-Party Exchanges 12-4
A1nortization Deductions 10-25 Receipt of Boot 12-5
Basis of Property Received 12-6
Prob le m Materials 10-28
Exchanges Benveen Related Parties 12-7
Discussion Questions 10-28
Transfer of Non- Like-Kind Property 12-8
Issue Identification Questions 10-30
Holding Period for Property Received 12-8
Problems 10-30
Comprehensive Problem 10-35 Involuntary Co nversions 12·9
Tax Strategy Problem 10-36 Involuntary Conversion Defined 12-10
Tax Form/Return Preparation Problems 10-36 Tax Treatment of Gai n Due to Involuntary Conversion
Case Study Problems 10-37 into Boot 12-10
Tax Research Problem 10-37 Replacement Property 12-12
Obtaini ng Replacement Property 12-13
CHAPTER 11 Time Requirements for Replacement 12-14
... ACCOUNTfNG PERIODS ANO METHODS 11-1 Sa le of Principal Residence 12-15
Accounting Periods 11·2 Principal Residence Defined 12-16
Required Payments a nd Fiscal Years 11-3 Sa le of More than One Principal Residence Within a
Changes in t he Accou nting Period 11-4 Two-Year Period 12-17
Returns for Periods of Less than 12 Months 11-5 Nonqualified Use After 2008 12-19
Involuntary Conversion of a Principal Residence 12-20
Overall Acco unt ing Method s 11· 7
Cash Receipts and Disbursements Method 11-7 Tax Planning Considerat ions 12-20
Accrual Method 11-9 Avoiding the Like-Kind Exchange Provisions 12-20
Hybrid Method 11-10 Sa le of a Principal Residence 12-21
viii Individuals .,.. Contents

Co mpliance and Procedura l Consideratio ns 12· 22 Reporting Gains Recaptured as Ordinary Income on
Reporting of Involuntary Conversions 12-22 Form 4797 13-24
Reporting of Sa le or Exchange of a Principal Reporting Casualty or Theft Gain or Loss on Form
Residence 12-23 4684 13-24
Problem Mat eria ls 12·23 Problem Materials 13·28
Discussion Questions 12-23 Discussion Questions 13-28
Issue Identification Questions 12-24 Issue Identification Q uestions 13-29
Problems 12-25 Problems 13-30
Comprehensive Problem 12-29 Comprehensive Problem 13-35
Tax Strategy Problem 12-29 Tax Strategy Problems 13-35
Tax Form/ Return Preparation Problems 12-30 Tax Form/Return Preparation Problems 13-36
Case Study Problem 12-31 Case Study Problems 13-36
Tax Research Problems 12-31 Tax Research Problem 13-37

CHA PTER 13 CHAPTER 14

... PROPERT Y TRANSACTIONS: SECTION 1231 AND ... SPECIAL TAX COMPUTATION MET HODS, TAX CREDITS,
RECAPTURE 13-1 ANOPAYMENT OFTAX 14-1
H istory of Sec. 1231 13-2
Alternative Minimum Tax 14·2
Overview of Basic Tax Treatment for Sec. 1231 13·3 AMT Computation 14-3
Net Ga ins 13-3 AMT Tax Rates and Brackets 14-3
Net Losses 13-3 AMT Exemption Amount 14-3
Tax Rate for Net Sec. 1231 Gain 13-4 AMT Tax Preference Items 14-4
Section 1231 Property 13·5 AMT Adj usnnents 14-4
Section 1231 Property Defined 13-5 AMT Credits 14-6
Real or Depreciable Property Used in Trade or Summary Illustration of the AMT
Busi ness 13-5 Computation 14-7
Involu ntary Conversions 13-6 Self-Employment Tax 14-8
Condemnations 13-6 What Constitutes Self-Employment Income 14-9
Other Involuntary Conversions 13-7
Perso nal and Business Tax Credits 14· 10
Proced ure for Sec. 1231 Treatment 13·7 Use and Importance of Tax Credits 14-10
Recapture Provisions of Sec. 1245 13-8 Value of a Credit Versus a Deduction 14-10
Purpose of Sec. 1245 13-9 Nonrefundable Personal Tax Credits 14-11
Recapture Provisions of Sec. 1250 13·10 Foreign Tax Credit 14-17
Purpose of Se.c. 1250 13-11 Business Related Tax Credits 14-19
Section 1250 Property Defined 13-11 Refundable Personal Credits 14-23
Unrecaptured Section 1250 Gain 13-12 Provisions Related to Healt h Insurance 14-24
Taxation of Gains on Sale or Exchange of Depreciable Health Insurance Premium Assistance Credit (Also
Real Property 13-12 Known as Premiu m Tax Credit) 14-24
Low-Income H ousing 13-15 Payment of Taxes 14-26
Add itio nal Recapture for Co rpo rat ions 13-16 Withholding of Taxes 14-27
Su,nmary of Secs. 1231, 1245, and 1250 Ga ins 13-17 Estimated Tax Payments 14-28
Recapture Provisions-Other App lications 13·18 Tax Planning Considerat ions 14-30
Gifts of Property Subject to Recapture 13-18 Avoiding the Alternative Minimum Tax 14-30
Transfer of Property Subje.c t to Recapture at Avoiding the Underpayment Penalty for Estimated
Death 13-18 Tax 14-31
Charitable Contr ibutions 13-18 Cash-Flow Considerations 14-31
Like-Kind Exchanges 13-19 Use of General Business Tax Credits 14-31
Involu ntary Conversions 13-19 Foreign Tax Credits and the Foreign Earned Income
Installment Sa les 13-19 Exclusion 14-32
Section 179 Expensing Election 13-20 Compliance and Procedural Considerations 14-32
Conservation and Land Clearing Expenditures 13-20 Alternative Mi nimum Tax (AMT) Fi ling
Intangible Drilling Costs and Depletion 13-21 Procedures 14-32
Gain on Sale of Deprecia ble Property Between Related Withholdings and Estimated Tax
Parties 13-22 Payments 14-32
Tax Planning Considerations 13·23 General Business Tax Credits 14-33
Avoiding the Recapture Provisions 13-23 Nonrefundable Personal Tax Credits 14-33
Compliance and Procedura l Considerations 13·24 Problem Materials 14· 33
Reporting Sec. 1231 Gains and Losses on Form Discussion Questions 14-33
4797 13-24 Issue Identification Q uestions 14-35
 Contents .... I ndi vidual s ix

Proble,ns 14-36 Computation of Tax for Controlled Groups 16-14

Comprehensive Proble,n 14-40 Consolidated Returns 16-16
Tax Strategy Problem 14-41 Transfers of Property to Controlled
Tax Form/Return Preparation Problems 14-42 Corporations 16-17
Case Study Problems 14-43 Section 351 Nonrecognition Requirements 16-17
Tax Research Problem 14-43 Basis Considerations 16-18
Treatment of liabilities 16-19
CHAPT ER 15 Corporate Capital Structure 16-21
... TAX RESEARCH 15·1
Earnings and Profits 16-21
Overview of Tax Research 15·2 Calculation of Earnings and Profits 16-21
Steps in the Tax Research Process 15·3 Current Versus Accumulated E&P 16-22
Importance of the Facts to the Tax Consequences 15·5 Noncash Distri butions 16-24
Creating a Factual Situation Favorable to the Tax Consequences to the Shareholders 16-24
Taxpayer 15-6 Tax Consequences to the Distributing
The Sources of Tax Law 15· 7 Corporation 16-24
The legislative Process 15-7 Stock Rede,nptions 16-25
The Internal Revenue Code 15-8 Determining Whether a Redemption Is a Dividend or
Treasury Regulations 15-9 Capital Gain 16-26
Administrative Pronouncements 15-11 Corporate Distributions in Complete
Judicial Decisions 15-14 Liquidation 16·28
Tax Treaties 15-24 Tax Consequences to the liquidating
Tax Periodicals 15-24 Corporation 16-28
Tax Services 15-25 Tax Consequences to the Shareholders 16-29
Se.ction 332: liquidation of a Subsidiary
The Internet as a Research Tool 15·26
Corporation 16-29
Ke}'\vord Searches 15-27
Search by Citation 15-28 Tax Planning Considerations 16-30
Noncom mercial Internet Services 15-28 Capital Structure and Section 1244 16-30
Dividend Policy 16-31
Citators 15·28
Use of losses 16-31
Using the Citator 15-30
Charitable Contributions 16-31
Professional Guidelines for Tax Services 15·30 Dividends-Received Deduction 16-31
Treasury Depart1nent Circular 230 15-30 Reduced Taxes on Taxpayer Stock Sales 16-32
AICPA's State1nents on Tax Standards 15-31
Compliance and Procedural Considerations 16-32
Sample Work Papers and Client Letter 15-34 Filling Requirements 16-32
Problem Materials 15·34 Schedule M-1 and M-2 Reconciliations 16-33
Discussion Questions 15-34 Schedule M-3 Reconciliation 16-34
Problems 15-35 Maintenance of E&P Records 16-34
Comprehensive Problem 15-38 Problem Materials 16·34
Tax Strategy Problem 15-38 Discussion Questions 16-34
Case Study Problem 15-39 Issue Identification Questions 16-39
Tax Research Problems 15-39 Problems 16-40
Tax Strategy Problems 16-45
CHAPT ER 1 6 Tax Form/Return Preparation Problems 16-46
... CORPORATIONS 16-1 Case Study Problems 16-4 7
Definition of a Corporation 16·2 Tax Research Problems 16-48
Similarities and Differences Between the Taxation of
Corporations and Individuals 16-3
Specific Rules Appl icable to Corporations 16-4
CHAPT ER 17
... PARTNERSHIPS ANDS CORPORATIONS 17-1
Capital Gains and losses 16-4
Dividends-Received Deduction 16-5 Types of Pass-Through Entities 17·2
Net Operating losses 16-6 Partnerships 17-2
Charitable Contributions 16-7 S Corporations 17-3
Compensation Deduction l i,nitation for Publicly limited liability Compan ies 17-3
Held Corporations 16-8 limited liability Partnersh ips 17-4
Computation of Tax 16·9 Taxation of Partnerships 17-4
Computation of Taxable Income 16-9 Formation of a Partnership 17-4
Computation of Regu lar Tax 16-9 Partnership Operations 17-8
The Corporate Alternative Minimum Tax (AMT) Special Allocations 17-9
and the Minim um Tax Credit (MTC) 16-10 Allocation of Partnership Income, Deductions, losses,
Penalty Taxes 16-11 and Credits to Partners 17-10
x In di v i du als .,.. Contents

Basis Ad jusanents for Operating Items 17-11 The Exempt Model 18-10
Special Deductions and Li,nitations 17-12 The Pension Model 18-10
Limitations on Losses and Restoration of Multiperiod Strategies 18-14
Basis 17-14 Summary and Comparison of Basic Investment
Transactions Between a Part ner and the Models 18-15
Partnersh ip 17-15 Other Applications of Investment Models 18· 15
Partnersh ip Distr ibutions 17-16 Roth Conversion Decision 18-16
Sale of a Para1ersh ip Interest 17-17 Pass-Through Entity Versus C Corporation 18-19
Optional and Mandatory Basis Ad justments 17-19
Implicit Taxes and Clienteles 18·24
Partnersh ip Elections 17-20
Problem Mat erials 18·27
Taxation of S Corporations 17· 21 Discussion Questions 18-27
Q ual ification Requirements 17-21 Problems 18-28
Election Requ irements 17-23
Tennination Conditions 17-24
S Corporation Operations 17-25 TA BLE S
Basis Ad jusanents to S Corporation 2017 Tax Tables and Rat e Schedules and 2018 Wit hholding
Stock 17-27 Tables (Partial) T· 1
S Corporation Losses and Lin1itations 17-28
O ther S Corporation Considerations 17-30
APP E ND I CES
Tax Planning Considerations 17-33
Use of Operating Losses 17-33 ... APPENDlX A
Income Shifting Among Family Members 17-34
Optional Basis Adjusunent Election Under Sec. Tax Research Working Paper File A·1
754 17-34 ... APPENDlX S
Compliance and Procedural Considerat ions 17·35 Tax Forms B· 1
Partnersh ip Filing Requirements and
Elections 1 7-35 ... APPENDlX C
Reporting Partnership Items on Form
MACRS Tables C-1
1065 17-35
S Corporation Fili ng Requ irements and Accounting
Method Elections 17-36 ... APPENDlX O
Reporting S Corporation Items on Form Glossary D· 1
11205 17-36
Comparison of Alternative Forms of Business ... APPENDlX E
Organizations 17-36 AICPA St atements on Standards
Problem Materials 17·36 for Tax Services Nos. 1- 7 E· 1
Discussion Questions 17-36
... APPENDlX F
Issue Identification Questions 17-41
Problems 17-41 Index of Code Sections F·1
Comprehensive Proble,n 17-4 7
Tax Strategy Problems 17-4 8 ... APPENDlX G
Tax Form/ Return Preparation Index of Treasury Regu lations G· 1
Problems 17-49
Case Study Problems 17-49 ... APPENDlXH
Tax Research Problems 17-50 Index of Government Promulgations H· 1
... APPEND()( I
CHAPTER 18
... TAXES ANO lNVESTMENT PLANNING 18-1 Index of Court Cases 1·1
Investment Models 18·2
... APPENDlX J
The Current Model 18-2
The Deferred Model 18-5 Subject Index J· 1
ABOUT THE EDITORS
Timothy J. Rupert is a Professor at the D' Amore-McKim School of Business at Northeast-
ern University. He received his B.S. in Accounting and his Master of Taxation from the
University of Akron. He also earned his Ph.D. from Penn State University. Professor
Rupert's research has been published in such journa ls as The Accounting Review, The Jour-
nal of the American Taxation Association, Behavioral Research in Accounting, Advances
in Taxation, Applied Cognitive Psychology, Advances in Accounting Education, and Jour-
nal of Accounting Education. In 2010, he received the Outstanding Educator Av,ard from
the Massachusetts Society of CPAs. He also has received the University's Excellence in
Teaching A,vard and the D'Amore-McKim School's Best Teacher of the Year av,ard multi-
ple times. He is active in the American Accounting Association and the American Taxation
TIMOTHY J. RUPERT Association (ATA) and has served as president, vice president, and secretary of the ATA.

Kenneth E. Anderson is the Pugh CPAs Professor of Accounting at the University of

Tennessee. He earned a B.B.A. from the University of Wisconsin- M ilwa ukee and subse-
quently attained the level of tax manager ,vith Arthur Young (no,v part of Ernst & Young).
He then earned a Ph.D. from Indiana University. He teaches corporate taxation, partner-
ship taxation, and tax strategy. Professor Anderson also is the Director of the Master of
Accountancy Program. He has published articles in The Accounting Review, The Journal
of the American Taxation Association, Advances in Taxation, the Journal of Accountancy,
the Journal of Financial Service Professionals, and a number of other journals.

KENNETH E. ANDERSON

ABOUT THE AUTHORS

Thomas R. Pope is the Ernst & Young Professor of Accounting at the University of Kentucky.
He received a B.S. from the University of Lou isville and an M.S. and D.B.A. in busi-
ness administration from the University of Kentucky. He teaches international taxation,
partnership and S corporation taxation, tax research and policy, and introductory taxa -
tion and has ,von outstanding teaching a,vards at the Un iversity, College, and School of
Accountancy levels. He has published articles in The Accounting Review, the Tax Adviser,
Taxes, Tax Notes, and a number of other journals. Professor Pope's extensive profes-
sional experience includes eight years ,vith Big Four accounting firms. Five of those years
,vere ,vith Ernst & Whinney (no,v part of Ernst & Young), including rwo years with
their National Tax Department in Washington, D.C. He subsequently held the position
of Senior Manager in charge of the Tax Department in Lexington, Kentucky. Professor
Pope also has been a leader and speaker at professional tax conferences all over the United
States and is active as a tax consultant.

xi
xii Individua ls ..,. About the Authors

0. Dale Bandy is the Professor Emeritus in the School of Accounting at the University of
Central Florida. He received a B.S. from the University of Tulsa, an M.B.A. from the
University of Arkansas, and a Ph.D. from the University of Texas at Austin . He helped to
establish the Master of Science in Taxation programs at the University of Central Florida
and California State University, Fullerton, \Vhere he previously taught. In 1985, he was
selected by the California Society of Certified Public Accountants as the Accounting
Educator of the year. Professor Bandy has published 8 books and more than 30 arti-
cles in accounting and taxation. His articles have appeared in the Journal of Taxation,
the Journal of Accountancy, Advances in Taxation, the Tax Adviser, The CPA Journal,
Management Accounting, and a number of other journals.

N. Allen Ford is the Larry D. Homer/KPMG Peat Marwick Distinguished Teaching Professor
of Professional Accounting at the University of Kansas. He received an undergraduate de-
gree from Centenary College in Shreveport, Louisiana, and both the M.B.A. and Ph.D. in
Business from the University of Arkansas. He has published over 40 articles related to tax-
ation, financial accounting, and accounting education in journals such as The Accounting
Review, The Journal of the American Taxation Association, and The Journal of Taxation.
He served as president of the American Taxation Association in 1979- 80. Professor Ford
has received numerous teaching awards, at the college and university levels. In 1993, he
received the Byron T. Shutz Award for Distinguished Teaching in Economics and Business.
In 1996 he received the Ray M. Sommerfeld Outstanding Tax Educator A\vard, \vhich is
jointly sponsored by the American Taxation Association and Ernst & Young, and in 1998
he received the Kansas Society of CPAs Outstanding Education A,vard.

David S. Hulse is an Associate Professor of Accountancy at the University of Kentuck'Y,

\Vhere he teaches introductory and corporate taxation courses. He received an undergrad-
uate degree from Shippensburg University, an M.S. from Louisiana State Un iversity, and a
Ph.D. from the Pennsylvania State University. Professor Hu lse has published a number of
articles on tax issues in academic and professional journals, including The Journal of the
American Taxation Association, Advances in Taxation, the Journal of Financial Service
Professionals, the Journal of Financial Planning, and Tax Notes.

LeAnn Luna is a Professor of Accounting at the University of Tennessee. She is a CPA and
holds an undergraduate degree from Southern Methodist University, an M.T. from the
University of Denver College of Law, and a Ph.D. from the University of Tennessee. She
has taught introductory taxation, corporate and partnership taxation, and tax research.
Professor Luna also holds a joint appointment \Vith the Center for Business and Economic
Research at the University of Tennessee, \Vhere she interacts frequently \Vith state policy-
makers on a variety of policy-related issues. She has published articles in the Journal of
Accounting and Economics, National Tax Journal, The Journal of the American Taxation
Association, and State Tax Notes .

Charlene Henderson is a faculty member in the Department of Accounting at Louisiana State

University. She earned undergraduate and master's degrees in accounting from Mississippi
State University. After working in public accounting and banking, she earned a Ph.D.
from Arizona State Un iversity. She has taught introd uctory taxation, corporate taxation,
and tax research. Her research has appeared in several journals, incl uding Journal of the
American Taxation Association, Journal of Accounting Auditing and Finance, Auditing: A
Journal of Practice and Theory, and a number of other journals.
 About the Authors ..,. Indiv i d u als xiii

Jared Moore is the Mary Ellen Phillips Associate Professor of Accounting at O regon State
University (OSU). He earned his undergraduate, Master of Taxation, and Ph.D. degrees
at Arizona State University. He is a CPA (AZ-inactive) and ,vorked in both public and
private accounting before pursuing his doctoral degree. Professor Moore has received sev-
eral teaching awards, incl udi ng the Byron L. Nev,ton Av,ard for Excellence in Teaching at
OSU, and has taught individual and business taxation, introductory and intermediate fi -
nancial accou nting, and doctoral-level fina ncial accounting research. His research interests
incl ude both tax and fina ncial accounting, and he has published in journals incl uding the
Journal of the American Taxation Association and the National Tax Journal.

William 0. Brink, Ph.D., CPA, CFP is an Assistant Professor in the Department of Accountancy
at the Farmer School of Business at Miami Un iversity in Oxford, O hio. He received his
B.S. from Appalachian State University in 2005 and his Masters in Accountancy from
The University of North Carolina Wilmington in 2007. Before attending the University of
South Carolina to obtai n his Ph.D. in Accountancy in 2014, he \VOrked in public account-
ing for RSM McGladrey. He teaches tax courses at both the undergraduate and graduate
level focusi ng on individual taxation, busi ness taxation, tax policy, tax academ ic research,
and tax legal research. He has co-authored articles in Journal of Business Ethics, Journal
of the American Taxation Association, Behavioral Research in Accounting, Advances in
Accounting Education, Advances in Taxation, The Conversation, CGMA Magazine, and
The Tax Advisor. He ,vas the Winner of the O utstandi ng Author Contribution in the 2017
Emerald Literati Net\vork A,vards for Excellence for an article published in Advances in
Accounting Education and has received numerous teaching a,vards.

Susan Porter is an Associate Professor of Commerce at the University of Virginia \vhere

she teaches both undergraduate and graduate tax courses. She earned her undergraduate
degree from Babson College. After working in public and private accounti ng, she earned
a Ph.D. from the University of Washington. She has published articles in the Journal of
Accounting and Economics, Contemporary Accounting Research, Journal of Accounting,
Auditing, and Finance, The Journal of the American Taxation Association, and a number
of other journa ls.

Michael S. Schadewald, Ph.D., CPA, is a Clinical Associate Professor in the Fisher School
of Accounting at the University of Florida, where he teaches courses in accou nting and
taxation. A graduate of the University of Mi nnesota, Professor Schade\vald has published
more than 50 articles in academic and professional journa ls, incl uding The Accounting
Review, Journal of Accounting Research, and Contemporary Accounting Research. He
also has served on numerous editorial boards, including The Journal of the American
Taxation Association, International Tax Journal, Journal of State Taxation, and Issues in
Accounting Education. Prior to joini ng the faculty at the University of Florida, Professor
Schade,vald taught at the University of Wisconsi n-Mi lwa ukee, ,vhere he also served as the
Director of the Deloitte Center for M ultistate Taxation, and the University of Texas in
Austi n. Prior to en teri ng academics, he \VOrked in the Mihvaukee office of Arthur You ng
(no,v EY).
PREFACE
New to this Edition

INDIVIDUALS
• Complere updaring of the chapter marerial for rhe provisions in the Tax Curs and Jobs Acr of 2017 affecring individual taxpayers,
including an explanation of the new rules and the relared implications of rhe following irems:
• Reduction in marginal tax rares
• Elimi nation of personal and dependency exe,nprions
• Changes in the deductabi liry of state and local taxes and casualty losses
• Elimi nation of miscellaneous ite1nized deductions
• Changes ro the a lrernative min i,num tax
• Increase in rhe ch ild rax credit
• Complete updating of sign ificant courr cases and IRS rul ings and procedures duri ng 2017 and early 2018
• All tax rare schedu les have been updated to reflect the rates and inflarion adjusrments for 2018
• Whenever new updates become available, they wi ll be accessi ble via MyLab Accou nting
• Updating of the end-of-chaprer tax return problems to 2017 (2017 tax forms are included because the 2018 tax forms ,vere not
ava ilable ,vhen t his edition ,vent to print ), but also including a supplemental expla nation for each tax return proble,n of ho,v the
solution wi ll change for the 2018 tax year given the provisions of the Tax Cuts and Jobs Act.

CORPORATIONS
• Complere updating of the chapter material for the provisions in t he Tax Cuts and Jobs Acr of 2017 affecring corporations and ot her
entities, including an explanation of the new ru les and the related i1nplications of the following items:
• Reduced corporate tax rate
• Qualified business income deduction
• New li,nitations on interest, business losses, and NOLs
• New ru les for t he taxation of international transactions
• The comprehensive corporate tax return, Problem C:3-65, has all new numbers for t he 2017 forms
• The comprehensive part nersh ip tax return, Problem C:9-58, has all new numbers for the 2017 forms
• The comprehensive S corporation tax return, Problem C:1 1-62, has all new numbers for the 2017 forms
• All tax rate schedu les have been updated to reflect the rates and inflation adjustments for 2018
• Whenever new updates become available, t hey ,viii be accessible via MyLab Accou nting

SOLVING TEACHING AND LEARNING CHALLENGES

The Rupert/Anderson 2019 Series in Federa l Taxation is appropriate for use in any firsr course in federal taxation, and comes in a
choice of three volumes:
• Federal Taxarion 2019: Individuals
• Federal Taxarion 2019: Corporations, Parrnerships, Esrates & Trusrs (the compan ion book to Individuals)
• Federal Taxarion 2019: Comprehensive (1 4 chapters from Individuals and 15 chapters from Corporarions)
• • For a custon1ized edirion of any of the chaprers for these texrs, contact your Pearson represenrarive and he or she can create a custom
rexr for you.
• The Individuals volume covers all entities, although the rrearment is ofren briefer rhan in the Corporations and Co,nprehensive vol-
umes. The Individuals volume, therefore, is appropriate for colleges and universities that require on ly one semester of raxation as ,veil
as those that require more than one semester of taxarion. Further, this volume adaprs the suggestions of the Model Tax Curriculum as
promu lgated by the A,nerican Insrirure of Certified Public Accou nranrs.
• T he Corporations, Partnerships, Estates & Trusts and Co111prehensive volu mes contain three comprehensive tax rerurn problems
,vhose data change wit h each edition, rhereby keepi ng the problems fresh . Problem C:3-65 conrains the comprehensive corporare
tax rerurn, Problem C:9-58 conrains the comprehensive partnersh ip rax rerurn, and Problem C:1 1-62 conta ins the comprehensive
S corporarion rax rerurn, ,vhich is based on the same facts as Proble,n C:9-58 so that srudents can compare t he returns for t hese
rwo entities.
• The Coyporations, Partnerships, Estates & Trusts and Co1nprehe11sive volumes contain sections called Financial Statement Impli-
cations, which discuss the i1nplications of Accounting Standards Codification (ASC) 740. The main discussion of accounting for
income taxes appears in Chapter C:3. The financial statement implications of other rransactions appear in Chaprers C:7, C:8, a nd
C:16 (Corporarions volume only).
xiv
 Pref ace ..,. I ndivi d ual s xv

Rupert/Anderson 2019 Series in Federal Taxation has an appropriate blend of technica l content of the tax law with a high level of
readability for students. It is focused on enabling students to apply tax principles within the chapter to real-life situations using many
strong pedagogical aids:
Real-World Example
These co,nments relate the text material to events, cases, and statistics occu rring in the tax and business environment. T he statistical
data presented in some of these comments are taken from the IRS's Statistics of Income at W\V\V.irs.gov.
Book-to-Tax Accounting Comparison
These comments compare the tax discussion in the text to the accounting a nd/or financial state1nent treatment of this material. Also,
the last section of Chapter C:3 discusses the financial statement implications of federal income taxes.
What Would You Do in This Situation?
Unique to the Rupert/Anderson series, these boxes place students in a decision-making role. The boxes include many controversies
that are as yet unresolved or are currently bei ng considered by the courts. These boxes make extensive use of Ethical Material as they
represent choices that may put the practitioner at odds with the cl ient.
Stop & Think
These «speed bu1nps" encourage students to pause and apply what they have just learned. Solutions for each issue are provided in the box.
Ethical Point
These conunents provide the ethic.al implications of material discussed in the adjoining text. Apply what they have just learned.
Tax Strategy Tip
These comments suggest tax planning ideas related to material in the adjoining text.
Additional Comment
These comments provide supplemental information pertaining to the adj acent text.

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Our pol icy is to provide annual editions and to prepare ti mely updated supplements when major tax revisions occur. We are most ap-
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basis for material in Chapter 1:18.
Please send any comments to Kenneth E. Anderson or Timothy J. Rupert.
AN INTRODUCTION
TO TAXATION
LEARNING OBJECTIVES
After studying this chapter, you should be able to
1 Discuss the history of taxation in the United States
2 Describe the three types of tax rate structures
3 Describe the various types of taxes
4 Discuss the criteria for a "good" tax structure, the objectives of the
federal income tax law, and recent tax reform proposals
5 Describe the tax entities in the federal income tax system
6 Identify the various tax law sources and understand their implications
for tax practice
7 Describe the legislative process for the enactment of the tax law
s Describe the administrative procedures under the tax law
9 Describe the components of a tax practice
1o Understand the importance of computer applications in taxation
1 -2 Individ ual s ~ Chapt er 1

C H APTER OUTLINE Federal income taxes have a significant effect on business, investor, and personal decisions in
History of Taxation in t he United the United States. Because tax rates can be as high as 21 o/o on corporations and over 40% on
States ... 1-2 individuals, virtually every transaction is impacted by income taxes. The follo\ving examples
Types of Tax Rate St ructures... 1-4 illustrate the impact of the tax la\V on various decisions in our society:
Other Types of Taxes ...1-7
Criteria for a Tax Structure ... 1-1 2 ~ Because of the deductibi lity of home mortgage interest and real estate taxes, an indi-
Entities in t he Federal Income Tax vidual may decide to purchase a home rather than to continue to rent an apartment.
System ...1-1 6
~ An investor may decide to delay selling some stock because of the significant taxes that
Tax Law Sources ... 1-24
Enactment of a Tax Law... 1-24
may result from the sale.
Administration of the Tax Law ~ A corporation may get a larger tax deduction if it leases property rather than purchas-
and Tax Practice lssues ...1-26
ing the property.
Components of a Tax
Practice ... 1-29 The purpose of th is text is co provide an introduction co the study of federal income
Computer Applications in Tax
Practice ... 1-31 taxation. Ho\vever, before discussing the specifics of the U.S. federa l income tax law, it is
helpful to have a broad conceptual understanding of the taxation process. This chapter
provides an overvie,v of the follo\ving topics:
~ Historical developments of the federal tax system
KEY POINT ~ Types of taxes levied and structural considerations
In many situations, t he use of ~ Objectives of the tax la,v, incl uding a discussion of recent tax reform proposals
t he tax laws to in fluence human
behavior is deliberate. As w ill be ~ Taxpaying entities in the federal income tax system
seen later in this chapter, tax laws
a re often used to achieve social ~ Tax la\v sources and the legislative process
and economic objectives.
~ Internal Reven ue Service (IRS) collection, examination, and appea ls processes
~ The nature of tax practice, includ ing computer applications and tax research

H ISTORY OF TAXATION
IN THE UNITED STATES

EARLY PERIODS
Discuss the history of The federal income tax is the dominant form of taxation in the Un ited States. In addition,
taxation in the United most states and some cities and counties also impose an income tax. Boch corporations
States and ind ividuals are subject co such taxes.
Prior to 1913 (the date of enactment of the modern-day federa l income tax), the fed-
eral government rel ied predominantly on customs duties and excise taxes co finance its
operations. The first federal income tax on individuals ,vas enacted in 1861 co finance the
H ISTORICAL NOTE Civil War but ,vas repealed after the \Var. The federal income tax was reinstated in 1894,
The reinstatement of the income however, that tax ,vas challenged in the courts because the U.S. Constitution required that
tax in 1894 was t he subject of an income tax be apportioned among the states in proportion co their populations. This
heated political controversy. In
general, the representatives in type of tax system, ,vhich \VOu ld be both impractical and difficu lt to admin ister, \VOuld
Congress from the agricultural mean chat different tax races ,vould apply co individua l taxpayers depending on their
South and West favored t he
income tax in lieu of customs states of residence.
duties. Representatives from the In 1895, the Supreme Court ruled that the tax \Vas in violation of the U.S. Constitution. 1
industrial eastern states were
against the income tax and fa-
Therefore, it \Vas necessary to amend the U.S. Constitution to permit the passage of a
vored protective tariff legislation. federal income tax la,v. This was accomplished by the Sixteenth Amendment, \Vhich was
ratified in 1913. The Sixteenth Amendment, ,vhile being an extraordinarily important
amendment, consists of one sentence.

Sixteenth Amendment to the Constitution of the United States

The Congress shall have t he power to lay and collect taxes on incomes, from whatever
source derived, without apportionment among the several States, and without regard to any
census or enu 1neration.

1 Pollockv. Famters' Loan & Tr11st Co., 3 AFTR 2602 (USSC, I 895). Nore, was held to be conscirucional because it was treated as an excise rax. See Flint
however, char a federal income rax on corporacions char was enacted in 1909 v. Stone Tracy Co., 3 AFTR 2834 (USSC, 1911).
 An Introduction to Taxation "' Individual s 1-3

REVENUE ACTS FROM 1913 TO THE PRESENT

HISTORICAL NOTE The Revenue Act of 1913 imposed a flat 1 o/o tax (\vich no exemptions) on a corporation's
The Revenue Act of 1913 con- net income. The rate varied from 1 % co 7% for individuals, depending on the individual's
tained sixteen pages.
income level. However, very fe,v individuals paid federa l income taxes because a $3,000
personal exemption ($4,000 for married individuals) \Vas permitted as an offset to taxable
income. These amounts ,vere greater than the incomes of most individua ls in 1913.
HISTORICAL NOTE Various amendments co the original la,v ,vere passed bet\veen 1913 and 1939 as separate
Before 1939, the tax laws were revenue acts. For example, a deduction for dependency exemptions ,vas provided in 1917.
contained in the most current rev-
enue act, a reenactment of a prior
In 1939, the separate revenue acts ,vere codified into the Internal Revenue Code of 1939.
revenue act plus amendments. In A similar codification ,vas implemented in 1954. The 1954 codification, ,vhich was known
1939, a permanent lax code was as the Internal Revenue Code of 1954, included the elimination of many "dead,vood" pro-
established; it was revised in 1954
and 1986. visions, a rearrangement and clarification of numerous code sections, and the addition of
major tax la,v changes. Whenever changes co the Internal Revenue Code (IRC) are made,
the old language is deleted and the new language added. Thus, the statutes are organized as
a single document, and a tax advisor does not have to read through the applicable parts of
all previous tax bills to find the most current law. In 1986, significant changes ,vere made to
the tax law, and the basic tax la,v ,vas redesignated as the Internal Revenue Code of 1986.
In December 2017, the Tax Cuts and Jobs Act (TCJA) ,vas passed by Congress, effective on
January 1, 2018. While the major changes relate to businesses, there are significant changes
for all taxpayers. The important changes of TCJA are included in this textbook.
The federal income tax became a " mass tax" on individuals during the ea rly 1940s.
This change ,vas deemed necessary to finance the revenue needs of the federa l govern-
ment during World War II. In 1939, less than 6% of the U.S. population ,vas subject to
the federa l income tax; by 1945, 74% of the population ,vas taxed. 2 To accommodate the
broadened tax base and to avoid significant tax collection problems, Congress enacted
pay-as-you-go withholding in 1943.
A major characteristic of the federal income tax since its inception to today is the manner
in ,vhich the tax law is changed or modified. The federa l income tax is changed on an incre-
mental basis rather than a complete revision basis. Under so-called incrementalism, ,vhen a
change in the tax la,v is deemed necessary by Congress, the entire la,v is not changed, but
specific provisions of the tax la,v are added, changed, or deleted on an incremental basis.
Thus, the federal income tax has been referred co as a "quilt\vork" of tax laws, referring
co the patch,vork nature of the law. Without question, one of the principal reasons for the
complexity of the federal income tax today is the incremental nature of tax legislation.

ADDITIONAL COM MENT REVENUE SOURCES

In 2016, 150 million individual As mentioned earlier, the largest source of federal revenues is individual income taxes. Other
income tax returns were filed,
and collections from individuals major revenue sources include Social Security (FICA) taxes and corporate income taxes (see
totaled S1.46 trillion. Table 1:1-1). T,vo notable trends from Table 1:1-1 are (1) the gradual increase in social insur-
ance taxes from 1960 to 2017 and (2) the gradual decrease in corporate income taxes for the
same period. Individual income taxes have remained fairly stable during the past 50 years.

TYPI CAL MISCONCEPTION T TABLE 1:1-1

It is often assumed that t he tax Breakdown of Federal Revenues
revenue from corporation income
taxes is the largest source of tax
revenue. However, the revenue 1960 1975 2000 2017
generated from this tax only
represents approximately 9% of
total federal revenues in 2017.
Individual income taxes 440fc, 450fc, 500fc, 480fc,
Social insurance taxes and contribution 16 32 32 35
Corporation income taxes 23 15 10 9
Other 17 8 8 8
Total 1OOOfc, 1OOOfc, 1OOOfc, 1OOOfc,

Source: Council of Economic Advisers, Economic Jndicator:s (Washington, DC: U.S. Government Printing Office, 1967.
1977, 2017).

2 Richard Goode, The Individual Income Tax (\Vashingron, DC: The Brookings
lnsrirurion, 1964), pp. 2-4.
1 - 4 Indivi duals ~ Chapter 1

TYPES OF T AX RATE STRUC T URES

THE STRUCTURE OF INDIVIDUAL

Describe the three types INCOME TAX RATES
of tax rate structures Virtually all tax structures are comprised of t\vo basic parts: the tax base and the tax rate.
The tax base is the amount to wh ich the tax rate is applied to determine the tax due. For
example, an individual's tax base for the federa l income tax is taxable income, as defined
and determined by the income tax law. Similarly, the tax base for the property tax is
generally the fa ir market val ue of property subject to the tax. The tax rate is merely the
percentage rate applied to the tax base.
A DDITIONA L COMMENT Tax rates may be progressive, proportional, or regressive. A progressive rate structure
In the 1950s, the top marginal tax is one \Vhere the rate of tax increases as the tax base increases. The most notable tax that
rate for individual taxpayers incorporates a progressive rate structure is the federa l income tax. Thus, as a taxpayer's
reached 92%. This astonish-
ingly high rate only applied to taxable income increases, a progressively higher rate of tax is applied. For 2018, the fed-
taxpayers with very high taxable eral income tax rates for individuals begin at 10% and increase to 12o/o, 22%, 24%,
incomes but still is an extremely
confiscatory tax rate.
32%, 35%, and 37% as a taxpayer's taxable income increases. 3 Examples 1:1-1 and 1:1-2
shov, ho\v the progressive rate structure of the federal income tax operates.

EXAMPLE 1:1 - 1 ..... Alice, who is single, has S30,000 taxable income in 2018. Her federal income taxes for the year are
S3,410, computed as follows: the f irst $9,525 of taxable income is taxed at 10% and t he remain-
ing $20,475 at 12%. (Fo r tax rates, see the inside front cover.) In 2017, t he tax would have been
LEGISLATIVE S4,034, which demonstrates the reduction of income taxes under the Tax Cuts and Jobs Act.
BACKGROUND Allen, w ho also is single, has taxable income of SG0,000. A 10%, rate applies to the first S9,525
Beginning with tax year 2018, of taxable income, 12% on the next $29, 175, and a 22% rate applies to the taxable income over
the top rate for high-income indi- $38, 700. Thus, Allen's total tax is $9, 140 ((0.10 x $9,525) + (0.12 x S29, 175) + (0.22 x $21,300)).
vidual taxpayers was decreased to
37% from 39.6%. If Allen's taxable income is $120,000, a 24% rate applies to $37,500 of his taxable income
($120,000 - $82,500) because the 24% rate appli es to taxable income above $82,500 for a
single individual and his tota l tax for the year is $23,090. Thus, the tax rates are prog ressive
because the rate of tax increases as a taxpayer's taxable income increases. .....

Notice in Example 1:1-1 that taxable income has doubled in size in the three cases, but
the income taxes have more than doubled (i.e., $3,410 to $9,140 to $23,090). This dem-
onstrates ho,v a progressive rate structure operates.

EXAMPLE 1:1 -2 ..... Assume the same facts as in Example 1: 1-1 except that Alice has taxable income of $240,000. Of
Alice's taxable income, $40,000 (S240,000 - $200,000) is subject to the 35% rate. A lternatively,
if Allen has taxable income of SG00,000, $100,000 ($600,000 - SS00,000) is subject to the top
marginal rate of 37%. .....

A proportional tax rate, sometimes called a flat tax, is one \vhere the rate of tax is
the same for all taxpayers, regardless of the level of their tax base. This type of tax rate
is generally used for real estate taxes, state and local sales taxes, personal property taxes,
customs duties, and excise taxes. A flat tax has been the subject of considerable discus-
sion over the past t\venty years and promises to be a controversial topic as the debate on
federal income tax reform continues into the future.

EXAMPLE 1:1 -3 ..... Assume the same facts as in Example 1:1-1, except that a 17%, tax rate applies to all amounts
of taxable income. Based on the assumed f lat tax rate structure, Alice's federal income tax is
SS, 100 on $30,000 of taxable income; A ll en's tax is $10,200 on SG0,000 of taxable income and
S20,400 on $120,000 of taxable income. The tax rate is proportional because the 17% rate ap-
pli es to both taxpayers without regard to their income level. As you can see, a proportional tax
rate resu lts in substantially lower taxes for higher income taxpayers.4 .....

3 4
See the inside from cover for the 2018 cax rares and Chapter 1:2 for a d iscus.. This example assumes the same cax base (taxable income) for the Aar cax as
sion of the computation procedures. 201 7 rare schedules and tax cables are with the current federal cax. Jvlost nar cax proposals allow only a few deduc,.
locaced immediacely before Appendix A. tions and, rherefore, would generate higher taxes than in che example.
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the street. The second big fire came in 1888 and burned the business
section along Spring Street from Calip Spring to the Presbyterian
Church. 480 houses were destroyed. Only four frame houses were
left standing in the area.

According to Goodspeed, T. J. Hadley brought a printing press from

Olathe, Kansas in November, 1879 and established the first
newspaper. The date of the first issue of the Echo is given as
February 21, 1880. Within two or three years, the town had two
additional newspapers, the Dispatch and the Herald.

Eureka Springs has had its full share of legend and folklore and some
of the fabulous tales are told with tongue in cheek. Take the marital
swap of “Uncle” Adam and “Uncle” Dick. A couple called “Adam and
Eve” lived in a rock shelter across the road from Johnson Spring. Dick
and his wife occupied an adjoining shelter to the south. One day
Adam traded Eve to Dick for his wife and got a horse and buggy and
a dog to boot. Dick and his newly acquired wife left the country soon
after the swap, but it is reported that the woman came back later
and lived with Adam. This happened, according to the old timers,
about the turn of the century.
[19]
Vance Randolph, in Who Blowed Up the Church House?, gives
a different version of the wife-trading story. He heard the anecdote
from an old timer in Eureka Springs about 1950. Here is his version:

“One time there was two old men lived up Magnetic Holler, right close
to a little branch they call Mystic Spring nowadays. One of these
fellows was Uncle Adam, and he had a wife. The other one was
knowed as Uncle Dick, and he didn’t have no wife, but he had two
cows. They got to trading jackknives and shotguns, and finally 34
Uncle Adam swapped his wife for one of Uncle Dick’s cows.
Folks used to trade wives pretty free in them days, and nobody said
much about it. Lots of them wasn’t really married anyhow, so there
wasn’t no great harm done.
“But it wasn’t long ’till word got around that Uncle Adam’s woman
had up and left him, and moved her stuff over to Uncle Dick’s cabin.
The next time Uncle Adam came into town, somebody asked him if
Uncle Dick had stole his wife. ‘Hell no,’ says Uncle Adam, ‘it was a fair
swap, all open and above board. Dick give me his best cow for the
old woman, and two dollars to boot.’

“Folks got to laughing about it, and one day the sheriff stopped Uncle
Adam in the street. ‘This here trading wives is against the law
nowadays,’ says he, ‘And everybody knows a woman is worth more
than a cow, anyhow.’ Uncle Adam laughed right in the sheriff’s face.
‘Don’t you believe it, Sheriff,’ he says, ‘Don’t you believe it! Why, that
there cow of mine is three-fourths Jersey!’”
35
 XIV
THE CAPTURE OF BILL DOOLIN
It was during the winter of 1895-96. Bill Doolin, the Oklahoma outlaw
was spending his “vacation” in Eureka Springs, taking the baths and
hiding out from the law. He had allegedly killed three marshals at
Ingalls, Okla., a short time before and committed other crimes over a
period of several years of outlawry, and the law was hot on his trail
when he disappeared at the first of the year, 1896.

Bill Tilghman, United States marshal, knew Doolin personally and set
out to capture him. At a boarding house in Ingalls he learned that the
outlaw had gone to some resort in Arkansas for his health and safety.
The marshal selected Eureka Springs as the most likely place for
Doolin’s hideout.

Tilghman arrived in Eureka Springs disguised as a preacher, wearing

a Prince Albert coat and a derby hat. He registered at a hotel and left
his baggage. He then walked to a little park in the center of town. A
man was stooped over the spring, filling a jug with water. When he
raised up the marshal saw that it was Doolin.

Tilghman knew the outlaw was quick on the draw and did not
attempt to arrest him. Instead, he dropped into a nearby shop and
watched him through the window. Doolin walked across the park,
crossed a bridge that spanned a little stream, and ascended a flight
of steps leading to a hotel.

Tilghman went back to the park, sat down and began thinking. He
had left a shotgun at his hotel and his first thought was to get the
gun, hide behind a tree and get his man as he came down the steps.
But he wanted to take him alive. Then he devised what he thought
was a better plan. He went to a nearby carpenter shop and ordered a
box made long enough to hold his shotgun. It was to be hinged and
easy to open. With this contraption he could sit in the park without
attracting attention and get Doolin as he approached. The carpenter
promised to have the box ready by late evening. He would polish it
and make it look like a musical instrument case. That would mean
another day in Eureka Springs. He would lay for Doolin early in the
morning as he came from his hotel.

Tilghman ate lunch at a cafe and then having time to kill, decided to
take one of the famous Eureka Springs baths. He noticed the Basin
Spring Bath House across the bridge from the Basin Circle. He walked
into the hallway and opened a door at the left to enter the lobby. His
eye took in everything in the room at a glance. There was a desk in
the corner with a man sitting behind it. Several men were in the
room, playing checkers or reading. One of them sat behind a pot-
bellied stove at the east end of the lobby, his face behind a
newspaper.

When Bill entered the room this man lowered his paper for an 36
instant. The marshal saw that it was Doolin.

“I want a bath,” said Tilghman and stepped quickly into the hall,
walking in the direction of the room marked “Baths.” Half way down
the hall he stopped in front of a door that opened directly into the
east end of the lobby; Doolin was sitting within a few feet of that
door.

What if he had recognized him and was awaiting his entrance? He

must take a chance. He pulled his .45 from its holster and opened the
door. There sat Doolin still reading.

“Put up your hands, I’ve got you covered,” said the marshal as he
stepped around the stove.

The outlaw’s eyes opened wide in surprise as he recognized

Tilghman. He reached for his gun but Tilghman grabbed for his wrist,
missed and caught his coat sleeve. The sleeve ripped, but he held on.
“Doolin, I don’t want to kill you, but I will if you don’t get your hands
up.”

Doolin saw that he was trapped and obeyed. Tilghman asked the
clerk to get the outlaw’s gun, but the man was so nervous that he
made several attempts before he succeeded in getting it out of the
holster. The other men in the lobby had run like quail when the
trouble started.

Tilghman put handcuffs on Doolin and took him to his hotel to get his
belongings. Among the items on the dresser was a silver cup the
outlaw had bought for his baby boy. Tilghman put it in the suitcase
along with other things and they were on their way to the depot to
catch the 4 o’clock train. A boy was sent to the carpenter to tell him
the box would not be needed.

When they got on the train, Doolin promised to make no attempt to

escape and the handcuffs were removed. They arrived in Guthrie,
Okla., at 10 p. m., and Doolin was placed in the federal jail to await
trial. But that trial never came. He made a jail break in July, hid out
on a Texas ranch for several months, and was killed by officers when
he attempted to return to Oklahoma to get his wife and baby.

(Credit for source material on the capture of Bill Doolin goes to the
late Charley Stehm, an article in the Eureka Springs Times-Echo by
Annie House, “Eureka Springs: Stair-Step Town” by Cora Pinkley
Call, and “Marshall of the Frontier—Life and Stories of William
Matthew (Bill) Tilghman”, written by his wife, Zoe Tilghman and
published by Arthur H. Clark and Company, Cleveland in 1949. The
incidents of the capture are somewhat similar in all these accounts
but Mrs. Tilghman goes into greater detail in reporting the story.)

37
 XV
STORIES IN STONE
According to the information on the pictorial sign board in the Basin
Circle Park, Eureka Springs has fifty-six miles of retaining walls.
Several years ago an old-timer told me he figured that the walls of
this town, if put end to end, would reach a distance of forty miles. No
one has taken the trouble to measure these walls so one guess is as
good as another. In addition to the walls, a large amount of stone has
been used in the construction of hotels, homes and business
buildings. 60,000 cubic yards of stone in the walls and buildings of
the city is a conservative estimate. In comparison with the Great
Pyramid of Cheops in Egypt, the only survivor of the Seven Wonders
of the ancient world, this mass of stone-work is comparatively small,
but it is a lot of stone to go into the make-up of one small town. It
would make a single wall four feet high, one foot thick, and
approximately sixty-six miles long.

The great Egyptian Pyramid consists of 3,150,000 cubic yards of

stone or about fifty times as much material as used in the building of
Eureka Springs. The pyramid is about 450 feet high and covers 13½
acres of land. It is made of 2,300,000 limestone blocks each weighing
2½ tons. According to ancient historians, it took 100,000 men twenty
years to build it. At Eureka Springs, workmen in Powell Clayton’s
time, “the roaring eighties,” put up most of the walls and buildings in
a period of eight or ten years. The Crescent Hotel was built in the
mid-eighties and several business buildings were constructed of stone
after the big fire of 1888.

The stone work of Eureka Springs may be only 1/50th of that of the
great pyramid, but the labor involved was immense. The weight of
60,000 cubic yards of limestone is approximately 132,000 tons. The
stone was quarried near Beaver six miles away. It had to be
transported in wagons or on railroad flat cars to the townsite. If
brought by rail it was handled three or four times before it reached
its destination. The mere lifting of the stone required at least three
hundred million foot-pounds of work. If we knew how many foot-
pounds a man can do in a day, we could figure the labor potential.
The stone had to be cut and laid by skilled workmen. Most of this
stone, laid seventy years ago, is in excellent condition today.

Both limestone and sandstone are used for building material in

northwest Arkansas, but the sandstone must be of the harder
varieties to be useful for this purpose. Limestone is preferred, either
of the Boone variety or marble. Marble limestone is found in Carroll
County, but it is not as plentiful as other grades. The block of marble
sent from Arkansas to be placed in the national Washington
monument, was quarried near the corner of Carroll and Newton
counties.

Onyx marble is found in this section and at one time Eureka 38

Springs had an onyx factory which used the stone in
manufacturing jewelry. Great slabs of it were taken from the caves in
the vicinity. It is a stone of many colors—white, cream, dull red, and
yellowish brown, with the colors usually in alternate stripes. It takes a
brilliant polish.

The agate, found in our hills, is a crystal formation, but the particles
are so minute that they are discernable only under the microscope. It
is shaped by the cavity in which it is formed. The colors depend upon
the mineral matter it contains; iron producing reds, saponite the
greens, chalcedony the grays, and caladonite the blues. The agate is
classed as a gem but it is also used in the manufacture of bowls,
vases, signet rings, and for rollers in the textile industry.

William Cullen Bryant in his poem “Thanatopsis” spoke of the earth as

“rock ribbed and ancient as the sun.” Perhaps he was wrong in his
conjecture that the earth is as old as the sun, but we leave that to
the astronomers. It is true that the rock-ribbed earth is very old and
each of the “ribs” gives testimony of antiquity. One of the interesting
fossilized remnants found in our Ozark country is the crinoid,
commonly referred to as a sea lily stem.

Had old Father Neptune decided to pick a bouquet of sea lilies for his
wife, the lovely Amphitrite, he could have found them in abundance—
on the floor of the sea where Eureka Springs now stands. According
to the geologists, there were two periods, each millions of years long,
and separated by millions of years, when this region was the bottom
of the sea. The Ozark Mountains are the oldest range on the North
American continent and were at one time higher than they are now.
They rose from the sea, grew old and weathered to a mere plain, and
then sank for a second inundation. During the millions of years that
followed, which geologists call the Mississippian Period, a class of sea
lilies, called Crinoids, lived in the warm waters of this vast sea.

These Crinoids were fixed to the bottom of the sea, preferring a

depth of about 150 fathoms. They were attached permanently, or
temporarily, mouth upward, with a jointed stalk. At the top of the
stem there was a muscular body that had both motor and sensory
qualities. It lived upon minute protozoa and other animalcules, which
it absorbed from the sea water.

When the sea receded from the North American continent these
Crinoids were preserved by nature’s chemistry. They were fossilized
into the Boone Limestone. These fossils are found in abundance in
the Ozarks, especially at Eureka Springs, and in Benton county near
Sulphur Springs, Arkansas. Some of the stems held together and
appear as screw-like formations in the rock. Sometimes they were
broken up and the discs or segments of the stem are scattered
through the rock strata. Two hundred seventy-five million years of the
earth’s past lie buried in this Ozark limestone. 39

I sometimes take tourists on hikes at Eureka Springs and one of my

favorite trails is over East Mountain that rises abruptly from the valley
floor of this famous stairstep town. Near Onyx Spring I point out the
Crinoids in the rock strata which give mute evidence that this region
was once the bottom of the sea. Some of these sea lily fossils are
almost perfect, others are broken into fragments.

One need not be a geologist, or even a student of geology, to

observe and enjoy the rock formation of the Ozarks. The region is an
open book and even he who runs may read and enjoy it.

There are stories in the stones at Eureka Springs. Tourists who visit
Cork, Ireland usually go out to the village of Blarney, four miles
distant, and take a look at the medieval castle built by Cormac
McCarthy in 1449. On the summit of the castle tower is the famous
Blarney Stone which has been kissed by thousands of people from all
parts of the world. It is an age-old superstition that to kiss this stone
endows one with the gift of coaxing, wheedling, flattery and blarney.
Eureka Springs does not have a “Wheedling Stone,” but it does have
the Sliding Rocks at Little Eureka Spring which tradition has marked
with special purpose. The name, Sliding Rocks, has a double
meaning. In the first place, two large flat rocks, each about twenty
feet in diameter, stand tilted against the mountain side at an angle of
forty-five degrees. They slid down the mountain, ages ago perhaps,
to their present location. That was long before the white man came
to drink the “Wonder Water” from the near-by spring. An oak tree a
foot in diameter now stands in the path which the rocks took in
making the descent to their present position. Putting the rocks in this
position was the work of Nature; to wrap them in a halo of tradition
called for the ingenuity of man.

Some person who liked to have fun noticed the Sliding Rocks and
started a custom that developed into a ritual. They became initiation
stones for newlyweds as a part of the charivari ceremony. In the
Ozarks, newly married couples are usually “shivareed” by their
friends. They are serenaded with bells and shotguns and other racket
making devices and if the groom refuses to “treat” with candy and
cigars, he is given an unconventional bath in the river. In some
communities the bride and groom are driven around town in a horse-
drawn vehicle or an old jalopy.
At Eureka Springs, it became a practice to have the newlyweds slide
down the perpendicular rock near the spring. It developed into a
tradition and even today honeymooners, others too, try the daring
slide to prove their courage. The surface of the stone is covered with
scratches made by shoe heels that dug-in during the sliding
operation. The most disastrous potential about this fun-making ordeal
is the disruption of the seat of the pants.

40
 XVI
THE SPRINGS
There are forty-two springs within the corporate limits of Eureka
Springs. Most of these belong to the city and are included in the
municipal park system. A few are privately owned such as Ozarka in
Mill Hollow, Congress, Lion, Carry Nation and Cold Spring on East
Mountain. Sam A. Leath has counted and named sixty-three springs
within a one-mile radius of the center of town and it is said that there
are about 1200 springs in the Western District of Carroll County.

The Basin Spring, so called because of the peculiar depression in the

limestone rock, was first called the Indian Healing Spring and
discovered by a pioneer hunter, Dr. Alvah Jackson, in 1854. It comes
from a cave in the cliff-side and in the early days made a cataract
down the mountain to the valley floor where it joined Little
Leatherwood Creek. About one hundred feet below the cave that
houses the spring is a flat rock, now covered with a deep layer of
concrete. In this rock, the Indians cut two basins, one about eighteen
inches in diameter and twelve inches deep, the other, twelve feet
farther down, about five feet in length and ten inches deep. The
larger basin was partially destroyed by falling rock before the spring
was discovered by white men. The smaller basin is still in existence at
the bottom of the Wishing Well. The fountain from this spring is
surrounded by the Basin Circle Park with band stand, and seats for
those who like to loiter in a restful, picturesque environment.

Sweet Spring is on Spring street around the corner from the post
office. Its original position was in the hollow about two hundred yards
below its present site. When Spring Street was laid out by Powell
Clayton and other city officials in the early eighties, the stream of
water was tapped and a stone pit erected with steps leading down to
the fountain. The spring itself was imprisoned in stone for sanitary
reasons. No one seems to know the origin of the name Sweet for this
spring. Benches beneath the hard maple and ginkgo trees surround
this spring and it is a cool spot for summer loafing.

In the early days, Harding Spring ranked next to Basin in importance.

It has supplied the Palace Bath House with water for bathing for
almost a half a century. It flows from a picturesque cliff on Spring
Street with a rock projection called Lover’s Leap a few feet away. It is
one of the most photographed spots in Eureka Springs.

Congress Spring at the rear of the Congress Spring apartments is

“honey out of the rock” for those who like top quality aqua pura. It
comes from a cave and is said to have been discovered by workmen
while blasting rock on Spring Street. Standing at the spring one may
look skyward and observe a street seventy feet directly above. 41
The rock formation at this point is a miniature Gibraltar.

Crescent Spring, between the Carnegie Library and Presbyterian

Church, derived its name from the large crescent-shaped ledge of
rocks over which it originally flowed for a distance of fifteen feet. It is
now walled in stone and sheltered with a pointed roofed pagoda.

Continuing on Spring Street, Grotto Spring “on the boulevard” is next.

It has a picturesque position in the mountain side, fronted with a lane
of sycamore trees. The spring was named because of its location in a
natural stone grotto.

On East Mountain there is water almost everywhere. Some of the

best known springs, each with its individual scenic setting, are: Cave,
Little Saucer, Big Saucer, Little Eureka, Onyx, Carry Nation, Soldier
and Cold. Cave spring, near the home of Mr. and Mrs. Glenn Ward
Dresbach, flows a stream of pure cold water from a narrow cave.
Little Eureka has a small stream and never goes dry. This spring is
known for the purity of its waters (5½ grains of solids to the gallon)
and many people swear by it. It is said that Little Eureka water won
second place in a world wide contest at the St. Louis World’s Fair in
1904. Water from a spring in Switzerland won first.
The Carry A. Nation spring flows from a cave which the crusader
used as an “ice box” during her sojourn in Eureka Springs (1908-11).
This cave has a constant temperature the year ’round and is an ideal
natural refrigerator. In the days preceding artificial refrigeration, the
East Mountain folks made use of Carry’s cave for storing milk, butter
and other perishables. The water from the cave spring has been
piped across the street to Hatchet Hall, which is now a museum and
art center, owned by the artists, Mr. and Mrs. Louis Freund.

Onyx Spring comes from a cave in which onyx was once secured for
making jewelry. It was formerly called Laundry Spring because of its
popularity as a place for washing clothes. A sarvis tree now grows
from the rock directly over the spring.

Soldier Spring is at the entrance of a small cave at the west end of

Nut Street on East Mountain. According to legend, two bushwackers
were killed at the entrance of this cave by federal soldiers during the
Civil War. A bushwacker is an outlawish fellow who hides behind a
bush and takes a “whack” at you with his rifle gun. In this instance,
the soldiers got the first whack and the stream from the cave was
named Soldier Spring. For several years the large oak tree across the
road from the spring was a natural bee tree and a swarm of honey-
makers occupied it each season. Not many modern towns can boost
of a bee tree within the city limits.

In Mill Hollow we have the famous Ozarka Spring, the only 42

Eureka Springs water that is commercialized. It is shipped in
glass or enamel-lined railway cars to many cities in the mid-west.
Ozarka is a liquid treasure from nature’s vast laboratory. Other
springs in the vicinity are Little Ozarka, Minnehaha with its Indian
legend, and the Bancroft Springs.

Magnetic Spring is one of the most popular springs in the city. The
water was once thought to be radio-active and old-timers claimed it
would magnetize a knife blade. It is a popular place for picnickers
and the city has provided a shelter-house with tables, barbecue pit
and other facilities. Magnetic Hollow has other springs such as Mystic,
which flows from a picturesque cliff, and Bell Spring which makes a
musical sound like the tinkling of a bell. An iron and sulphur spring
was once located near the railway depot, but is not now flowing.

To the west and south of the city, within walking distance, are the
famous Oil and Johnson springs and sixteen springs that feed the city
lake that supplies the municipal water system. A bathhouse once
stood under the cliff between Johnson and Oil Springs. The oil spring
is peculiar in that the waters have an oleaginous feeling when rubbed
between the hands. It was once considered beneficial in diseases of
the scalp.

Lion Spring flows from the cliff near the back door of the home of Mr.
and Mrs. Everett Wheeler, publishers of the Eureka Springs Times-
Echo. For many years the Lion Spring Hotel, operated by “Mother”
Belden, was located on this site. A stone Lion’s head is set up as a
dispensary and the water flows through its mouth. This spring once
supplied a stream of water for Dr. Alvah Jackson’s primitive
bathhouse in the rock shelter fifty feet below. A wash-tub was
secured from a sugar camp on Keel’s Creek and this, with half-a-
dozen canteens, constituted the outfit of the first water-cure
establishment in this part of the state.

Calip Spring is on South Main Street near the Elk’s Club. It supplied
the community watering trough in the early days of the town.
Fishermen now use this trough as a depository for minnows. Gadd
Spring is farther north on Main Street and is housed in a rock edifice
made from crystal and other odd-shaped rocks.

In regard to the springs at Eureka, L. J. Kolklosh wrote in 1881:

“No other springs in the world have had so many cures and such a
reputation in so short a time as the Eureka Springs of Arkansas.
History does not record an equal.... Eureka had made a name that
has been heard throughout Christendom.”
43
 XVII
THE LAY OF THE TOWN
A crazy quilt is made up of pieces arranged without pattern or order.
Eureka Springs is like that. It is an architectural labyrinth unique
among cities. The recently built annex of the Penn Memorial Baptist
Church has a home for the minister on the third floor. You may enter
at the street-level door on Mountain Street, walk through the rooms—
a distance of about forty feet—and look down upon Owen Street,
thirty feet below. This sounds like an architectural fairy tale, but it is
true. Houses are built like that in this Switzerland of America. In
many homes the street entrance is on the second or third floor, or the
house may be reached by a stairway clinging to the mountain side.
One business house is surrounded by streets like a moat ’round a
castle and it has four street addresses each on a different level. In
the early days when the town was thronged with health seekers who
wanted homes near the springs, terraces were built and hemmed-in
with massive stone walls. Houses were constructed on these terraces
with stairways leading from one level to the other. Frequently a
natural cave opens at the backdoor. The yards and gardens have the
appearance of “The Hanging Gardens of Babylon,” built by
Nebuchadnezzar for his hill-loving queen. Some residents may step
from their gardens to the roof of the house while others must climb
stairways to their patch of vegetables.

The first lawsuit in Eureka Springs, according to the old-timers, was

caused by a woman who lived in one of these terraced homesites.
She carelessly threw dishwater out of the backdoor and down a
neighbor’s chimney, damaging the furniture.

Vance Randolph tells about a drunken farmer who was found in the
streets of the town one Saturday night. The pavement is not level by
any means and the poor farmer was walking with one foot on the
sidewalk and one in the gutter. A woman came along and the fellow
called on her for help. “You’re just drunk,” she told him. “Is that it?”
he said, much relieved, “My gosh, I thought maybe I was crippled.”

Eureka Springs is laid out with 238 named streets with no direct cross
intersections. (One or two right-angle crossings have been found
since Ripley featured this item in his “Believe It or Not.”) On the map
the streets look like a bewildered maze with the letters U and V
formed fifty-one times, the letter S thirteen times, O, seven times,
and perhaps other alphabetical curiosities in this labyrinth of streets.
There are five street levels on West Mountain from Main Street in the
valley to the Crescent Hotel on Prospect Avenue.

Many exaggerated tales have been told about this “crazy quilt” town.
There is the fellow, for instance, who doesn’t need a picture window
in his house to observe the scenery. He merely looks up the 44
chimney and watches his neighbor drive the cows home from
the pasture. And don’t forget the well digger who was digging a well
on East Mountain. When down about forty feet the bottom of the well
fell out and he landed (on his feet) right in the middle of Main Street.
They had to change their plans and dig the well up instead of down
in order to strike water.

Eureka Springs has only two business thoroughfares, Main Street in

the valley from Planer Hill to the railroad station, and Spring Street
which branches off of Main at the City Auditorium and winds around
the mountain to the Crescent Hotel. Once, in the early days, a feud
developed among the merchants on Main (then called Mud Street)
and they built a high board fence right down the middle of the street.
This made the traffic lanes so narrow that a wagon could barely
squeeze through. The fence was soon removed by order of the city
authorities. Spring Street is lined with flowing springs—Sweet,
Harding, Congress, Crescent, Grotto, and Dairy on the Harmon
Playgrounds, once the site of the old auditorium. This street was
engineered by Governor Powell Clayton (they always called him
“governor”) who helped dress up the town in the early eighties.
Sweet spring was “moved” from the hollow behind the post office to
its present location on the Spring Street level.

In addition to the street layouts, other believe it or nots in the city

are the Basin Park Hotel, “eight floors and every floor a ground floor,”
the St. Elizabeth’s Church, “entered through the steeple,” and Pivot
Rock, sixteen inches in diameter at the base and thirty-two feet
across at the top. The hotel stands against the side of the mountain
with its street level door on Spring. It is bridged from the rear to
paths on the mountain side at four different levels. The “steeple” of
the church is in reality a detached bell-tower. It is on the Crescent
Grade level and steps lead down to the church which is set on a
terrace held in place by a twenty-foot wall. A rock can be tossed from
this terrace to the roof of the Carnegie Library about one hundred
feet below on another street. The travel distance between the two
locations is about one-fourth mile.

The numerous stairways of wood and stone, connecting street levels,

have given rise to the name, “Stairstep Town.” Cora Pinkley Call used
this title for her book on Eureka Springs, published in 1953. Some of
the leading stairways are: Jacob’s Ladder, Sweet Springs, Magnetic
Spring Skyway, and the “upway” from Spring Street to Eureka Street.
Jacob’s Ladder is a series of wooden steps up East Mountain from the
Main Street level to the Skydoor residential district on the mountain
side. Rest stops are provided along the way in the form of seats
where the old may rest and the young, perchance, do a little
courting. The Sweet Spring steps are of stone and they lead from the
spring, through the tree tops, to the terminus of two streets 45
three hundred yards above. The Magnetic Spring stairway is at
the junction of Main street with Magnetic Drive, reaching up to
Hillside (Depot Grade). These steps are now covered with moss and
seldom used. It was once a popular walk-way from the Sanitarium on
the hill to Magnetic Spring. The winding “up way” from the foot of
Mountain Street at the Baptist Church is a short cut to a private home
called Mount Air. Taking this stairway reminds us of the tourist who
asked a native Ozarker if he was on the right road to Springfield.
“Well, not exactly,” he replied, “This road just moseys along for a
spell, then it turns into a pig trail, then a squirrel track, and finally
runs up a tree and ends in a knot-hole.” If you take this stairway and
path to the upper street, turn to the left and follow the path around
the mountain, you end up at the rear entrance to the fourth floor of
the Basin Park Hotel.

Airplane View of the City

46
 XVIII
THE STREET CAR SYSTEM
Eureka Springs at one time had the most unique street car system in
the nation. It began as a mule car line in 1891, but was electrified
seven years later. It remained in operation until 1923 when it was
crowded out by jalopies which invaded the town. The streets were
not wide enough to accommodate both the street car and the Model
T. The total length of the line was about three miles, but the two
terminals of the main line were only half a mile apart. The entire
system was a single track with three passing switches. The track was
standard gauge and placed near the curb at one side of the street, as
the streets were too narrow for center tracks.

John T. Brown, writing in “Trolley Sparks,” says that the Citizens

Railway Company of Eureka Springs had a total of twelve cars, five of
which were closed cars operated by one man, six two-man open cars,
and one work-car which was also used as a party car. Except for two
of the cars, all were originally mule-drawn cars purchased second
hand from Houston, Texas. These cars were motorized with second
hand electrical equipment purchased from the Detroit Street
Railways. In 1904, two new summer cars were obtained from the St.
Louis Car Company.

The Daily Times-Echo in the twenty-fifth anniversary issue of April 24,

1905, says:

“In no other city on the continent can there be found a street railway
that leads such a winding course around and up and down the
mountain-sides as does the Citizens Electric Railway of Eureka
Springs. As you alight at the depot of the St. Louis and North
Arkansas Railway you find a well-equipped street car there in waiting,
and presently you are swung up and around the mountain side along
what appears to be a ledge or precipice, and to the timid, it seems
that in each instance there is danger of the car being hurled to the
valley below. But really such a possibility is very remote, for during all
the years the line has been in operation there has never been a
serious accident. To make safety doubly sure, the far-seeing
management has had guard rails laid all along this section of the line.
From the depot up the mountain side to the intersection with the
main line at the Crescent Spring, a little more than half a mile, the
ascent amounts to a fraction over 101 feet, or a little more than 200
feet to the mile. The main line, which circles around West Mountain,
traversing the most popular thorofare of the city and passing most all
the famous springs and principal institutions, is not without its grades
and wondrous curves.... At the Auditorium (now the Harmon
Playgrounds), the track commences a most charming and tortuous
ascent, and a feat of engineering that has challenged the admiration
of many scientific men who have visited the resort. A roadbed 47
had to be graded around the mountain side at angles that
would seem ridiculous were it anywhere else than in this unusual
mountain range. One car will be only a few yards from and above the
other, and apparently going in the same direction when actually, they
are headed toward opposite ends of the line. These ends, however,
are only 300 yards apart, one end resting in the valley while the other
is at the mountain’s peak. From the Crescent Hotel to the Auditorium
there is a descent of 140 feet.

“The equipment and service on this street railway is better than can
be found in many cities of far greater population than Eureka Springs,
and the entire system is a source of gratification and pride to our
people. Visitors make the valley echo with their merry shouts as they
are carried around its course in the beautifully decorated and lighted
trolley party cars, and the bands and orchestras of the city are
frequent participants in these festivities.”
48
 XIX
CARRY A. NATION
Carry A. Nation was a militant voice in the “wilderness of sin” at the
turn of the century. Her three hatchets, which she named “Faith,
Hope and Charity,” cut deeply into the liquor industry. Not that the
liquor she destroyed in her attacks on bars and saloons amounted to
a great deal, but her influence in fostering nation-wide prohibition
was far reaching. She spent considerable time in jail and paid
numerous fines, but this did not lesson her enthusiasm for the cause
to which she devoted her life. Carry hated liquor, tobacco, rouge, lip-
stick, and immorality in all its phases. She operated under the
unwritten law which, she thought, superseded man-made legislation.
Even some of the churches did not condone her radical ways and
closed their doors to her. But she organized her own.

Carry married twice; first to a young fellow in Cass County, Missouri,

who called himself “doctor.” He was addicted to drink and Carry could
not reform him so she left him and returned to the home of her
parents. He died shortly after their baby was born. Her second
marriage was to David Nation, a lawyer, newspaper man, and later, a
Campbellite preacher. This marriage fared better than the first one
but it was not a happy affair. Carry cut the swath for the family and
David had to string along as best he could.

Carry Nation’s militant crusades against the liquor traffic began at

Kiowa, Kansas about 1900. After “cleaning up” the town to her
satisfaction she turned her face toward Wichita. She met with
considerable opposition in the big town and her raids landed her in
jail, but friends paid her out. At Topeka she used the hatchet for the
first time in her raids.
After a few years of raiding and smashing she went into chautauqua
to lecture on temperance. She made a speaking tour in Europe in
1908 and landed in jail in Scotland where she had to serve the full
sentence. (The Scotch did not like to see their whiskey spilled). In
1909, at the age of sixty-three, she bought a little farm near Alpena
in Boone County, Arkansas where she spent a part of her time during
the year that followed. Then she selected Eureka Springs as her
retirement home and purchased a two-story frame house on Steele
Street which she named Hatchet Hall. She decided to start a college
at Eureka Springs for the teaching of temperance. She called it the
Carry A. Nation College and erected a frame building near her home
for class rooms. But the college did not last long for in 1911, while
making a temperance speech from a buggy in the street in front of
the Basin Circle, she had a stroke, and died a few days later. Her
body was taken to her girlhood home at Belton, Missouri for burial.

49
 XX
A BANK ROBBERY THAT FAILED
On the night of September 26, 1922, five men were camped in the
woods on the hill near where the Mount Air Court is now located, well
hidden from the traffic on U. S. Highway 62. Sitting around the camp
fire were Si Wilson, Marcus Hendrix, a 21-year-old Indian, a man
named Cowan, and the two Price brothers, Charlie and George. They
were desperate Oklahoma outlaws from the Cookson Hills, remnants
of the old Henry Starr gang. Their business at Eureka Springs was to
rob the First National Bank.

Sitting around the bed of coals this September night, the outlaws
discussed their plans. Charlie Price, the leader, did most of the
talking. He outlined the plan for the robbery on the morrow at 12:05
P.M. when practically all business houses would be closed for the
lunch hour. Hendrix was to remain in the car at the front of the bank,
ready for a quick getaway.

“I guess you fellers know what you’re doing,” said Wilson, who had
recently joined the gang. “But don’t forget what Sam Lockard and
Henry Starr said. They warned you that Eureka Springs was a
deathtrap.”

Price laughed and said that it would be easy because everything was
well planned.

“We’d better hit the hay and get some sleep,” said Charlie. “Big day
tomorrow.” As he rolled into his blankets he remembered to wind his
watch. He turned the stem carefully in the darkness but fate took a
hand and a little extra pressure sent the hands around one revolution
without his knowledge. His faithful old watch had played a trick on
him.
At exactly 11:05 A.M., mistaken by the bandits to be 12:05 P.M., a car
drove up in front of the First National Bank on Spring Street. Hendrix
remained at the wheel while the four others entered the bank. The
story of the robbery and its tragic aftermath has been told in
newspapers, by Horace H. Brown in Startling Detective Magazine, and
by Cora Pinkley Call in her book “Eureka Springs—The Stair-Step
Town.”

Members of the bank staff on duty on September 27, 1922, were:

Tobe Smith, cashier, Fred Sawyer, teller, Mrs. Maude Shuman, Miss
Loma Sawyer and Miss Jewel Davidson. Customers in the bank when
the robbers entered were: Sam Holland, Robert Easley, John Easley
and Luther Wilson. Others who walked in while the holdup was in
progress were: John K. Butt, Claude Arbuckle and Bob Bowman, clerk
at the Basin Park Hotel.

Tobe Smith saw the four men enter the bank and when they drew
their guns he stepped on the burglar alarm which had 50
connections at the Bank of Eureka Springs, a block up the
street, and the Basin Park Hotel, the same distance in the other
direction. The robbers did not know this but lined up the occupants
of the bank, face to the wall, and proceeded to scoop up all available
cash and bonds. While doing this Charlie Price noticed the clock on
the wall. The hands stood at exactly 11:10 A.M. Time had played its
trick.

In the meantime the alarm had caused a furor of excitement in town,

and C. E. Burson of the Bank of Eureka Springs had sent a bullet
from his pistol that punctured a rear tire of the bandit’s car. Young
Hendrix, getting excited, started the car slowly down Spring Street
but a bullet struck him as he reached the junction with Center Street
and he turned the car into a railing at the head of a stairway. He was
captured without offering resistance.

By this time the four bandits had left the bank with the money in a
sack, taking two of the bank employees as hostages. They knew they
would have to fight their way out and sought to escape down the
stairway by the Times-Echo office which leads to Center Street. Guns
were popping and bullets flying everywhere. Si Wilson was killed
instantly, George Price died a few minutes after being taken to Dr. R.
H. Huntington’s hospital, Charlie Price died from his wounds a few
days later.

Cowan was wounded. He and Hendrix were sentenced to terms in

the state penitentiary.

Eureka Springs citizens who battled with the outlaws were: Ernie
Jordan, Joe McKimmey, Jess Littrell, Robert Bowman, Homer Brittan
and Sam Harmon. The story of their courage in defeating this
desperate gang without loss of a man was told in newspapers
throughout the country. None of them were wounded except Ernie
Jordan who received a powder burn in the face. F. O. Butt, Eureka
Springs attorney, was president of the First National Bank at that
time. He had his office over the bank building. He was glad to see the
sack of money and bonds returned without loss. It had been dropped
on the Center Street stairway during the fight.

51
 XXI
INSPIRATION POINT
The Ozarks is a land of dreams. Some of them succeed, some fail.
Traveling through the hill country we find numerous ruins of partially
built projects, that reveal the urge of man to build and perpetuate.
“Coin” Harvey’s Pyramid at Monte Ne, the Kingston Project in
Madison County, the old Chautauqua Assembly at Sulphur Springs,
the numerous old hotels at once-popular watering places, ghosts of a
past era when the water cure was a national fad, social and cultural
colonies, the lengthened shadows of promoters or reformers, that
existed for a few years and then passed into oblivion. These are
monuments to dreams that failed or prospered for a season and then
passed out.

On the other hand there are numerous active enterprises in the hills
such as Ted Richmond’s Wilderness Library in Newton County, and
the famed “School of the Ozarks” near Hollister, Missouri. Other
projects have been built with broad business perspective such as the
town of Bull Shoals. Churches have been successful in establishing
permanent institutions such as the Sequoyah Assembly at Fayetteville
and the Subiaco Academy in Logan County. Some projects with more
than local interest were started by one person and completed by
others.

The unique stone building called “The Castle,” located at Inspiration

Point in Carroll County, on U. S. Highway 62, six miles west of Eureka
Springs, was originally the dream of a Texas inventor and oil man. In
the 1920’s, W. O. Mowers of Dallas selected this scenic point as the
site of a palatial country home because of its comparative isolation
and the view of White River 500 feet below. Being a world traveler, it
reminded him of scenery on the Rhine River in Germany with which
he was familiar, and he visualized the replica of an old German castle.
The rock used in the construction of the building was quarried near
the village of Beaver, five miles away. Each stone was cut to fit a
certain place in the structure and was put together like a jigsaw
puzzle. The living room was made 30 by 44 feet, with a huge
fireplace at each end. Pointed rock covered the exterior, following an
Egyptian plan of architecture.

After spending about $80,000 on the project the Texas man was
unable to complete it. In 1932, the building and several hundred
acres of land were purchased by Charles Reign Scoville, a noted
traveling Evangelist, of the Christian Church. He completed the
building and made it a regional center for evangelism and religious
training. This scenic spot overlooking the river and the spacious valley
was a great inspiration to the preacher-evangelist, so he named it
Inspiration Point. This name has now become a permanent
geographical feature. Mr. Scoville lived only a few years to enjoy his
dream.

In 1938, Mrs. Scoville gave the property to Phillips University of 52

Enid, Oklahoma, to be a Christian center where individuals and
groups might come for spiritual refreshment, and for study and
training. The project has made rapid growth during the fifteen years
it has been operated as a service institution. It now has an assembly
hall and dormitories where groups may come for a day or a week, or
longer. As many as 100 persons may be cared for at one time. Rev.
and Mrs. George P. Rossman are directors and managers of the
project.

The big attraction at the present time at Inspiration Point is the Fine
Arts Colony held for six weeks each summer. It is directed by
Professor Henry Hobart, of Phillips University, and provides instruction
in music (piano, organ, voice, theory, band and orchestra
instruments), drama, speech and painting. The opera workshop
produces a light opera each summer, which is taken on tour after
having been produced locally.
Groups begin coming to Inspiration Point in April and continue until
November. Tourists are welcome at the Castle at all times of the year
and they come by the thousands to see its unique construction and
to view the articles of antique and historical interest left by Mr. and
Mrs. Scoville. The view of the White River Valley from “The Point,”
which includes the ranch of Dr. and Mrs. Ross Van Pelt, is one of the
finest in America.

The Castle at Inspiration Point

53
 XXII
DISTINGUISHED VISITORS
Eureka Springs has had many distinguished visitors during its
seventy-five years of history. Some of them made only brief visits to
our scenic city while others spent several weeks and returned from
year to year. One of them who thought of Eureka Springs as an
earthly paradise was the chewing gum king, William Wrigley, Jr.

Mr. Wrigley first visited Eureka Springs in 1902 and put up at the
Thatch Hotel where he spent most of the winter. He returned in the
autumn of 1903 and spent about three months at the Chautauqua
Hotel, later moving to a cottage on Linwood Avenue. It has been said
that no greater admirer of scenic beauty ever came to the Ozarks
than William Wrigley.

His greatest pleasure was to get out on the trails on horseback with
Sam Leath, then acting as guide in charge of the Eureka Springs
Bureau of Information and the Crescent stables. A canyon five miles
west of the city was named after him for this was one of the spots he
especially enjoyed.

The chewing gum king, whose net income was $1,125,000 in 1904,
took a liking to Eureka Springs and proposed to buy all the land
within a radius of three miles of the city and make it into a public
park if the city authorities would agree to keep it policed and free
from junk and garbage. The hills and valleys were then covered with
vast growths of virgin timber which Mr. Wrigley wished to preserve.
But the city government turned him down and he went to Catalina
Island, off the California coast, where he spent millions in
development. Many noted writers such as Zane Grey and Mary
Roberts Rhinehart located on the island as a result of his project.
Another famous visitor was the landscape artist, F. S. VanNess who
came to Eureka Springs from Chicago in October, 1902. Sam Leath
took him on twenty-eight rides within two weeks, observing the
splendor of the Flaming Fall Revue, but the artist did not paint a
single picture. When Mr. Leath asked him why he did not paint he
replied that the color was beyond his reach; that it would be an insult
to the Creator to try to put it on canvas. Later, after the color had
faded, he returned to the Ozarks and Mr. Leath guided him over the
same route. This time he painted profusely, both landscapes and
items of human interest. Two of his paintings may be seen today in
the lobby of the Basin Park Hotel. One portrays a group of gamblers
seated around a table, the other is that of old Dr. Messick on his
burro which was painted in November, 1902. Dr. Messick was a
retired Chicago doctor who “went native” and spent his last days
living and practicing medicine in the hills near Eureka Springs.

54
 XXIII
HOG SCALD
Hog Scald, ten miles south of Eureka Springs is an undiscovered
country, so far as tourists are concerned, but for riches of tradition
and excellence of scenic beauty it cannot be surpassed in the Ozark
highlands. It is a land of clear, gushing springs, laughing brooks and
tumbling waterfalls; water everywhere, spilling over rocky ledges and
twisting happily through granite-lined canyons. It is a land of massive
oak, stately pine and verdant cedar, of purple grapes that cling to
broad leafed vines and red berries that tinge the cheeks of the hills
with romantic blushes. It seems a land of divine favor and it is indeed
fitting that the early pioneers of the thirties and forties found here, in
a temple not built with hands, the ideal place to worship God. Under
a giant ledge overlooking Hog Scald creek they held worship for more
than three-quarters of a century.

The sturdy people who trekked into these hills from Kentucky and
Tennessee were the salt of the earth in character. And like their
Puritan and Cavalier sires, they did not forget to give thanks to God
for the Promised Land of the Ozarks. The visitor who loiters for a
season in this Eden of beauty will realize, a little, the influence of
such an environment upon these sturdy pioneers who had their feet
deeply set in the soil of mediocrity, so far as learning is concerned,
but who saw the thumb prints of God in every work of nature.

The spacious natural shelter below Auger Falls on Hog Scald creek
attracted these settlers as a suitable place to hold religious services.
Here was an auditorium on one side of the stream with pulpit of rock
for the minister, and choir stalls for the singers, in a convenient
shelter opposite.
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