58. LO.3, 4 Donna does not think she has an income tax problem but would like to discuss her situation with you just to make sure she will not get hit with an unexpected tax liability. Base your suggestions on the following relevant financial information:

a. Donna’s share of the SAT Partnership income is $150,000, but none of the income can be distributed because the partnership needs the cash for operations.

b. Donna’s Social Security benefits totaled $8,400, but Donna loaned the cash received to her nephew.

Sales tax from the sales tax table is $1,860. Dan and Freida made Federal estimated tax payments of $8,000. The Kentucky income tax rate is 4%.
Part 1—Tax Computation Compute Dan and Freida’s 2012 Federal income tax payable (or refund due). If you use tax forms for your computations, you will need Form 1040 and Schedules A, B, and E.
Suggested software: H&R BLOCK At Home.
Part 2—Tax Planning Dan plans to reduce his work schedule and work only half-time for WJJJ in 2013. He has been writing songs for several years and wants to devote more time to developing a career as a songwriter. Because of the uncertainty in the music business, however, he would like you to make all computations assuming that he will have no income from songwriting in 2013. To make up for the loss of income, Freida plans to increase the amount of time she spends selling real estate. She estimates that she will be able to earn $90,000 in 2013. Assume that all other income and expense items will be approximately the same as they were in 2012. Assume that Sam will be enrolled in college as a full-time student for the summer and fall semesters. Will the Butlers have more or less disposable income (after Federal income tax) in 2013? Write a letter to the Butlers that contains your advice and prepare a memo for the tax files.