Dan plans to reduce his work schedule and work only half-time for WJJJ in 2017. 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 2017. 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 2017.

Assume that all other income and expense items will be approximately the same as they were in 2016.

Assume that Sam will be enrolled in college as a full-time student for the summer and fall semesters. Gina and Sam will continue to qualify as dependents.

Assume a personal exemption amount of $4,050 for 2017.

The $3,100 commission received on January 10, 2017, is included in the $90,000 income to be earned by Freida in 2017.

The 25% 2016 marginal tax rate remains the same in 2017.

Interest income, dividend income, partnership income, and itemized deductions are the same for 2017.

Complete the following paragraph regarding whether the Butlers will have more or less disposable income (after Federal income tax) in 2017.

There will be a net $____?_______ reduction in salary and wages which will also result in a decrease the Kentucky income tax, Social Security tax, and Medicare tax . The net reduction in the Butler's aftertax cash flow will be approximately $21,200 .

Dan was employed as a manager by WJJJ, Inc. (employer identification number 11-1111111, 604 Franklin Street, Corbin, KY 40702), and Freida was employed as a salesperson for Corbin Realty, Inc. (employer identification number 98-7654321, 899 Central Street, Corbin, Ky 40701). Selected information from the W2 Forms provided by the employers is presented below. Dan and Freida use the cash method.

Line	Description	Dan	Freida
1	Wages, tips, other compensation	$74,000	$86,000
2	Federal income tax withheld	11,000	12,400
17	State income tax withheld	2,960	3,440

Freida sold a house on December 30, 2016, and will be paid a commission of $3,100 (not included in the $86,000 reported on the W2) on the January 10, 2017 closing date.

Other income (as reported on 1099 Forms) for 2016 consisted of the following:

Dividends on CSX stock (qualified)		$4,200
Interest on savings at Second Bank		1,600
Interest on City of Corbin bonds		900
Interest on First Bank CD		382

The $382 from First Bank was original issue discount. Dan and Freida collected $16,000 on the First Bank CD that matured on September 30, 2016. The CD was purchased on October 1, 2014, for $14,995, and the yield to maturity was 3.3%.

Dan received a Schedule K1 from the Falcon Partnership, which showed his distributive share of income as $7,000 (non passive income).

In addition to the above information, Dan and Freida's itemized deductions included the following:

Paid on 2016 Kentucky income tax		$700
Personal property tax paid		600
Real estate taxes paid		1,800
Interest on home mortgage (Corbin S&L)		4,900
Cash contributions to the Boy Scouts		800

Sales tax from the sales tax table is $1,860. Dan and Freida made Federal estimated tax payments of $8,000. All members of the family had health insurance coverage for all of 2016. Dan and Freida do not wish to contribute to the Presidential Election Campaign. The Kentucky income tax rate is 4%.