Daniel B. Butler and his spouse Freida C. Butler 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, 1969, and Freida was born on August 20, 1970.

During 2020, Dan and Freida furnished over half of the total support of each of the following individuals, all of whom still live at home:

1. Gina, their daughter, age 22, a full-time student, who married on December 21, has no income of her own and did not file a joint return with her husband, Casey, who earned $10,600 during 2020. Gina's Social Security number is 123-45-6788.
2. Willie, their son, age 19, graduated high school in May 2020. He is taking a leap year and will not begin college until 2021. He had gross income of $6,300 in 2020. Willie's Social Security number is 123-45-6787.
3. 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, 2020, and will be paid a commission of $3,100 (not included in the $86,000 reported on the W2) on the January 10, 2021, closing date.

Other income (as reported on 1099 Forms) for 2020 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 an original issue discount. Dan and Freida collected $16,000 on the First Bank CD that matured on September 30, 2020. The CD was purchased on October 1, 2018, 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 2020 Kentucky income tax		$700
Personal property tax paid		600
Real estate taxes paid		1,800
Interest on home mortgage (Corbin S&L)		4,900

Sales tax from the sales tax table is $1,860. Dan and Freida made Federal estimated tax payments of $8,000. They have never owned or used any virtual currency, and they do not wish to contribute to the Presidential Election Campaign. For 2020, they received the correct amount of economic impact payments (2020 recovery credits). The Kentucky income tax rate is 4%.

Required:

Compute Dan and Freida's 2020 Federal income tax payable (or refund due). Use Form 1040 and Schedules 1, B and the Qualified Dividends and Capital Gain Tax Worksheet to complete this tax return. If there is a tax overpayment, the Butlers would like a refund. If additional tax is due, assume no underpayment penalty applies.

It may be necessary to complete the tax schedules before completing Form 1040.

What is tax-exempt interest (2a) and qualified dividends (3a)?

1 Wages, salaries, tips, etc. Attach Form(s) W-2. 1 160,000 2a Tax-exempt interest .. 2a o b Taxable interest. 2b 1,982 3a Qualified dividends . 3a 0 b Ordinary dividends 3b 4,200 4a IRA distributions 4a b Taxable amount 4b 5a Pensions and annuities 5a b Taxable amount 5b Social security benefits b Taxable amount 6b 7 Capital gain or (loss). Attach Schedule D if required. If not required, check here 7 8 Other income from Schedule 1, line 9 8 7,000 9 Add lines 1, 2b, 3b, 46, 5b, 6b, 7, and 8. This is your total income. 9 173,182 10 Adjustments to income: a From Schedule 1, line 22. 10a b Charitable contributions if you take the standard deduction. See instructions 10b