Bob and Melissa Grant are married and live in Lexington, Kentucky. The Grants have two children Jared age 15 and Alese age 12. The Grants would like to file a joint tax return for the year.

The following information relates to the Grants tax year:

Bobs Social Security number is 987-45-1234

Melissas Social Security number is 494-37-4893

Jareds Social Security number is 412-32-5690

Aleses Social Security number is 412-32-6940

The Grants mailing address is 95 Hickory Road, Lexington, Kentucky 40502

Jared and Alese are tax dependents for federal tax purposes

All four of the Grants were covered by health insurance during 2016

Bob Grant received the following during the year:

Employer	Gross Wages	Federal Income Tax Withholding	State Income Tax Withholding
National Storage	$66,200	$8,000	$3,750
Lexington Little League	$2,710	0	0

Melissa Grant received the following during the year:

Employer	Gross Wages	F.I.T. Withholding	S.I.T. Withholding
Jensen Photography	$24,500	$2,450	$1,225

All applicable and appropriate payroll taxes were withheld by Grants respective employers.

The Grants also received the following during the year:

Interest Income from First Kentucky Bank $130

Interest Income from City of Lexington, KY Bond $450

Interest Income from U.S. Treasury Bond $675

Interest Income from Nevada State School Board Bond $150

Workers Compensation payments to Bob $4,350

Disability payments received by Bob on account of injury $3,500 (National Storage paid 100% of premiums the premiums on the policy and included the premium payments in Bobs taxable wages)

Receipt of payment by Melissa as a result of a lawsuit for damages sustained in a car accident:

Medical Expenses $2,500

Emotional Distress $12,000

Punitive Damages $10,000

Total $24,500

Eight years ago, Melissa purchased an annuity contract for $88,000. This year, she received her first payment on the annuity. The payment amount was $15,000. The annuity started to pay on January 1 and she received a full first years payment. It will pay her $15,000 per year for ten years (beginning with this year). The $15,000 payment was reported to Melissa a form 1099-R for the current year (box 7 contained an entry of 7 on the form).

The Grants did not own, control or manage any foreign bank accounts nor were they a grantor or beneficiary of a foreign trust during the tax year.

The Grants paid or incurred the following expenses during the year:

Dentist/Orthodontist (unreimbursed by insurance) $8,500

Doctors (unreimbursed by insurance) $ 625

Prescriptions (unreimbursed by insurance) $ 380

KY state tax payment made on 4/15/16 for 2015 liability $1,350

Real property taxes on residence $1,800

Vehicle property tax based upon age of vehicle $250

Mortgage interest on principal residence $8,560

Interest paid on borrowed money to purchase the City of Lexington, KY municipal bonds $400

Interest paid on borrowed money to purchase U.S. Treasury bonds $240

Contribution to the Red Cross $1,000

Contribution to Senator Rick Hartleys Re-election Campaign $2,500

Contribution to First Baptist Church of Kentucky $6,000

Fee paid to Jones & Company, CPAs for tax preparation $200

In addition, Bob drove 6,750 miles commuting to work and Melissa drove 8,230 miles commuting to work. Both the Grants have represented to you that they maintained careful logs to support their respective mileage.

The Grants drove 465 miles in total to receive medical treatment at a hospital in April.

Note: The information provided is for the taxpayers 2016 tax year.

Instructions:

1. complete the Federal Individual Income Tax Return (Form 1040),

2. Ignore the requirement to attach the form(s) W-2 to the front page of the Form 1040.

3. If required information is missing, use reasonable assumptions to fill in the gaps

Note: Indivivdual income tax is the major subject of this case not accounting