Arthur James, age 68, and his wife, Betty, age 63, live at 2010 Space Blvd., Satellite Beach, FL 32604. Arthurs Social Security number is 299-84-6745 and Bettys Social Security number is 603- 91-5782. Arthur and Betty had the attached items for tax year 2021.

REQUIRED: Using the tax formula discussed in the text, prepare the information for the tax return for Arthur and Betty James for the current tax year. Be sure to show appropriate detail for items included and calculations of amounts for those items for each of the following areas.

(1) Gross income.

(2) Deductions for adjusted gross income (AGI).

(3) AGI.

(4) Deductions from AGI.

(5) Taxable income.

(6) Income tax liability.

(7) Income taxes due or tax refund amount.

ARTHUR AND BETTY JAMES TAX INFORMATION FOR TAX YEAR 2021
(a)	Arthur worked part time for McWendys Restaurant as a cook and earned $7,450 during the year. Betty did not work during the year.
(b)	Arthur is retired and draws both Social Security and a pension. The information from those forms includes the following.
	(1) Arthurs Social Security benefits totaled $12,000 during the year. He made payments for Medicare insurance of $420.
	(2) Arthur received pension benefits of $15,500 during the year. The distributions from the pension plan were fully taxable since Arthur made no contributions to the plan.
(c)	Arthur and Betty have joint investments from which they received the following income.
	(1) Interest income.
	( i) Interest on City of Jacksonville bonds, $350.
	( ii) Interest on IBM corporate bonds, $525.
	(iii) Interest on U.S. Treasury bills, $240.
	(2) Dividend income.
	( i) Dividends on Intel common stock, $100. The stock was purchasedon March 10, 2019.
	(ii) Dividends on IBM common stock, $200. The stock was purchased on January 5, 2015.
(d)	Arthur and Betty also own a home in North Carolina. Arthur and Betty use the home during the entire month of August in order to escape the heat of Florida. They rent the property to other tenants for the entire months of December through July for $800 per month. They had the following expenses related to the property for the year.
	(1) Repairs and maintenance, $700.
	(2) Utilities, $1,150.
	(3) Depreciation, $1,250.
	(4) Property taxes, $2,000.

	ARTHUR AND BETTY JAMES TAX INFORMATION (CONTINUED) FOR TAX YEAR 2021
(e)	Arthur and Betty also had the following items during the year.
	(1) Premiums on medical insurance, $2,500.
	(2) Unreimbursed medical expenses, $3,000.
	(3) Property taxes on primary residence, $1,500.
	(4) Mortgage interest on primary residence, $3,250.
	(5) Charitable contributions to Last Methodist Church, all in cash, $1,200. They have proper substantiation for the contributions.
(f)	Federal income tax withheld.
	(1) Arthurs earnings from McWendys, $745.
	(2) Arthurs pension, $2,200.