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. Dans Social Security number is 111111112, and Freidas is 123456789. Dan was born on January 15, 1965, and Freida was born on August 20, 1966.

During 2016, Dan and Freida furnished over half of the total support of each of the following individuals, all of whom still live at home.

a) Gina, their daughter, age 22, a fulltime student, has no income of her own. Ginas Social Security number is 123456788.

b) Sam, their son, age 20, who had gross income of $6,300 in 2016. He graduated from high school in May 2016, Started College in August 2016, then dropped out of college in September 2016. Sams Social Security number is 123456787.

c) Ben, their oldest son, age 26, is a fulltime graduate student with gross income of $5,200. Bens Social Security number is 123456786.

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 987654321, 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 1,000 12,400

17 State income tax withheld 12,960 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.

Before marrying Freida, Dan was married and divorced to Sarah. Under the divorce agreement, Dan is to pay Sarah $500 per month. Dan paid Sarah $5,500 in 2016, his December alimony payment was not made until January of 2017. Sarahs Social Security number is 123456785

The Butlers also had (1) $1,600 in interest income from their savings account, (2) they sold ABC stock on 8/15/2016 for $10,000 (originally purchased for $4,000 on 1/15/2013), and (3) they sold XYZ stock on 10/15/2016 for $3,000 (originally purchased for $4,000 on 12/15/2015).

Prepare the 2016 Federal income tax return for the Butlers. You may work in groups no larger than 3 (i.e. 1, 2, or 3). Submit one tax return per group. Please submit (1) a cover page with a list of students who participated in the group project, (2) Form 1040, (3) calculation of Capital gain (including LT or ST), and (4) calculation of tax.

Hints:

1) Take the standard deduction

2) Dont forget to check the box for the filing status

3) Review the rules as for what qualifies as a student for purposes of the Qualifying Child tests. See IRS publication 501 page 13.

4) Make sure you are not using 2017 information (i.e. personal exemptions, standard deduction, tax brackets etc.).

5) Normally interest and capital gains would require additional forms (Schedule B and Schedule D). However for this assignment do not prepare those forms/schedules, simply enter the appropriate amount directly onto form 1040.