Step 1: Rewrite the given differential equation:
\[
(1 + x^2)\,dy = - (1 - \tan^{-1}x)\,dx
\]
Step 2: Separate the variables:
\[
dy = -\frac{1 - \tan^{-1}x}{1 + x^2}\,dx
\]
Step 3: Integrate both sides:
\[
\int dy = -\int \frac{1}{1 + x^2}\,dx + \int \frac{\tan^{-1}x}{1 + x^2}\,dx
\]
\[
y = -\tan^{-1}x + \frac{1}{2}(\tan^{-1}x)^2 + C
\]
Step 4: Apply the initial condition \( y(0) = 1 \):
Since \( \tan^{-1}(0) = 0 \),
\[
1 = C \Rightarrow C = 1
\]
Step 5: Evaluate \( y(1) \):
\[
\tan^{-1}(1) = \frac{\pi}{4}
\]
\[
y(1) = -\frac{\pi}{4} + \frac{1}{2}\left(\frac{\pi}{4}\right)^2 + 1
= \frac{\pi^2}{32} - \frac{\pi}{4} + 1
\]