Daniel B. Butler and Freida C. Butler, husband and wife, file a joint return. The Butlers live at 625 Oak Street in Corbin, KY 40701. Dan's Social Security number is 111-11-1112, and Freida's is 123-45-6780. Dan was born on January 15, 1967, and Freida was born on August 20, 1968.
During 2018, Dan and Freida furnished over half of the total support of each of the following individuals, all of whom still live at home:
- Gina, their daughter, age 22, a full-time student, who married on December 21, 2018, has no income of her own and for 2018 did not file a joint return with her husband, Casey, who earned $10,600 during 2018. Gina's Social Security number is 123-45-6788.
- Willie, their son, age 20, who had gross income of $6,300 in 2018, dropped out of college in October 2018. He had graduated from high school in May 2018. Willie's Social Security number is 123-45-6787.
- Ben, their oldest son, age 26, is a full-time graduate student with gross income of $5,200. Ben's Social Security number is 123-45-6786.
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, 2018, and will be paid a commission of $3,100 (not included in the $86,000 reported on the W2) on the January 10, 2019, closing date.
Other income (as reported on 1099 Forms) for 2018 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, 2018. The CD was purchased on October 1, 2016, for $14,995, and the yield to maturity was 3.3%.
Dan participated on a game show and won a cash prize of $7,000.
In addition to the above information, Dan and Freida's itemized deductions included the following:
| Paid on 2018 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 United Way | | 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 2018. Dan and Freida do not wish to contribute to the Presidential Election Campaign. The Kentucky income tax rate is 4%.
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| 26. | Figure the tax on the amount on line 1. If the amount on line 1 is less than $100,000, use the Tax Table to figure the tax. If the amount on line 1 is $100,000 or more, use the Tax Computation Worksheet . . . . . . . . . . . |
Qualified Dividends and Capital Gain Tax Worksheet 1. Enter the amount from Form 1040, line 10. However, if you are filing Form 2555 or 2555- EZ (relating to foreign earned income), enter the amount from line 3 of the Foreign Earned Income Tax Worksheet (Taxable income) 2. Enter the amount from Form 1040, line 3a* 2. 4,200 1. 149,182 3. Are you filing Schedule D?* Yes Enter the smaller of line 15 or 16 of Schedule D. If either line 15 or line 16 is blank or a loss, enter -0- 3. 0 No Enter the amount from Schedule 1, line 13 4. Add lines 2 and 3 4. 4,200 5. If filing Form 4952 (used to figure investment interest expense 5. If filing Form 4952 (used to figure investment interest expense deduction), enter any amount from line 4g of that form. Otherwise, enter-O-. 6. Subtract line 5 from line 4. If zero or less, enter -0- 5. 6. 4,200 7. Subtract line 6 from line 1. If zero or less, enter -o- . 7. 144,982 8. Enter: $38,600 if single or married filing separately, $77,200 if married filing jointly or qualifying widow(er), 8. 77,200 $51,700 if head of household. 9. Enter the smaller of line 1 or line 8 9. 77,200 10. Enter the smaller of line 7 or line 9 10. 77,200 11. Subtract line 10 from line 9. This amount is taxed at 0% 11. 12. Enter the smaller of line 1 or line 6 12. 4,200 13. Enter the amount from line 11 13. o 14. Subtract line 13 from line 12 14. 4,200 15. Enter: $425,800 if single, $239,500 if married filing separately, 15. 479,000 $479,000 if married filing jointly or qualifying widow(er), 16. Enter the smaller of line 1 or line 15. 16. 149,182 17. Add lines 7 and 11 17. 144,982 18. Subtract line 17 from line 16. If zero or less, enter -0- 18. 4,200 19. Enter the smaller of line 14 or line 18 19. 4,200 20. Multiply line 19 by 15% (0.15) 20. 630 21. Add lines 11 and 19 21. 4,200 7 22. Subtract line 21 from line 12 22. 23. Multiply line 22 by 20% (0.20). 23. 0 23. Multiply line 22 by 20% (0.20) 23. 0 24. Figure the tax on the amount on line 7. If the amount on line 7 is less than $100,000, use the Tax Table to figure the tax. If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet 25. Add lines 20, 23, and 24 24. 23,775 25. 24,405 26. 24,537 26. Figure the tax on the amount on line 1. If the amount on line 1 is less than $100,000, use the Tax Table to figure the tax. If the amount on line 1 is $100,000 or more, use the Tax Computation Worksheet .. 27. Tax on all taxable income. Enter the smaller of line 25 or line 26. Also include this amount on the entry space on Form 1040, line 11a. If you are filing Form 2555 or 2555-Ez, do not enter this amount on Form 1040, line 11a. Instead, enter it on line 4 of the Foreign Earned Income Tax Worksheet 27. 24,405 Qualified Dividends and Capital Gain Tax Worksheet 1. Enter the amount from Form 1040, line 10. However, if you are filing Form 2555 or 2555- EZ (relating to foreign earned income), enter the amount from line 3 of the Foreign Earned Income Tax Worksheet (Taxable income) 2. Enter the amount from Form 1040, line 3a* 2. 4,200 1. 149,182 3. Are you filing Schedule D?* Yes Enter the smaller of line 15 or 16 of Schedule D. If either line 15 or line 16 is blank or a loss, enter -0- 3. 0 No Enter the amount from Schedule 1, line 13 4. Add lines 2 and 3 4. 4,200 5. If filing Form 4952 (used to figure investment interest expense 5. If filing Form 4952 (used to figure investment interest expense deduction), enter any amount from line 4g of that form. Otherwise, enter-O-. 6. Subtract line 5 from line 4. If zero or less, enter -0- 5. 6. 4,200 7. Subtract line 6 from line 1. If zero or less, enter -o- . 7. 144,982 8. Enter: $38,600 if single or married filing separately, $77,200 if married filing jointly or qualifying widow(er), 8. 77,200 $51,700 if head of household. 9. Enter the smaller of line 1 or line 8 9. 77,200 10. Enter the smaller of line 7 or line 9 10. 77,200 11. Subtract line 10 from line 9. This amount is taxed at 0% 11. 12. Enter the smaller of line 1 or line 6 12. 4,200 13. Enter the amount from line 11 13. o 14. Subtract line 13 from line 12 14. 4,200 15. Enter: $425,800 if single, $239,500 if married filing separately, 15. 479,000 $479,000 if married filing jointly or qualifying widow(er), 16. Enter the smaller of line 1 or line 15. 16. 149,182 17. Add lines 7 and 11 17. 144,982 18. Subtract line 17 from line 16. If zero or less, enter -0- 18. 4,200 19. Enter the smaller of line 14 or line 18 19. 4,200 20. Multiply line 19 by 15% (0.15) 20. 630 21. Add lines 11 and 19 21. 4,200 7 22. Subtract line 21 from line 12 22. 23. Multiply line 22 by 20% (0.20). 23. 0 23. Multiply line 22 by 20% (0.20) 23. 0 24. Figure the tax on the amount on line 7. If the amount on line 7 is less than $100,000, use the Tax Table to figure the tax. If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet 25. Add lines 20, 23, and 24 24. 23,775 25. 24,405 26. 24,537 26. Figure the tax on the amount on line 1. If the amount on line 1 is less than $100,000, use the Tax Table to figure the tax. If the amount on line 1 is $100,000 or more, use the Tax Computation Worksheet .. 27. Tax on all taxable income. Enter the smaller of line 25 or line 26. Also include this amount on the entry space on Form 1040, line 11a. If you are filing Form 2555 or 2555-Ez, do not enter this amount on Form 1040, line 11a. Instead, enter it on line 4 of the Foreign Earned Income Tax Worksheet 27. 24,405
