Comprehensive Problem. Harvey and Betty Duran, both age 37, are married with one dependent child. Determine their taxable income from the following information for 2006, and their tax liability. Both the ABC and XYZ partnerships are passive activities. Assume dividends are taxed as ordinary income.

Harvey's salary.. $45,000

Betty's salary. 62,000

Dividends received from domestic corps.. 11,000

Interest 7,000

Itemized deductions.... 6,920

Net loss from ABC partnership (acq. 1983)... (14,200)

Net loss from XYZ partnership (acq. 1988)... (6,000)

Harvey's business income (moonlighting). 7,700

Harvey's business deductions (b/f ofc. exp) 22,000

Harvey's home office expenses... 10,500

Net loss on rental property..(31,000)