Gerald and Patty Hanson are married taxpayer with the following income and expenses for 2018:

Gerald's w-2 wages:$80,000

Patty's w-2 wages:40,000

Patty's sole proprietorship

(Patty is a noted sculptor)

oSales$20,000

oMaterials(8,000)

oDepreciation(1,000)

Interest income on their investments$5,000

Dividend income500

In additional, Gerald and Patty incurred the following expenses:

Prescription drugs (after insurance)$450

Vitamins 100

Medical insurance premiums1,350

Braces for their son(not covered by insurance)1,500

Clinic and hospital bills (after insurance)800

Property taxes on home5,000

State income taxes

oWithheld from their w-26,000

oEstimated payments400

Federal income taxes withheld30,000

State and local sales tax paid on new personal auto 1,000

Interest on home mortgage 10,000

Interest paid on credit cards2,400

Cash contributions to church3,000

Contribution of ABC stock to United Way

(FMV $10,000, adjusted basis $2,000)

Patty donated a sculpture to the local art museum

The sculpture was appraised at $5,000.

Gerald, a CPA, paid $300 for his CPA license.His employer does not reimburse the cost for the license.

In addition, Gerald and Patty drove 300 miles this year for medical and dental treatments.Patty also drove 1000 miles to attend a conference for her church.Patty was not a delegate to this conference.

Required:

1.Determine Gerald and Patty's adjusted gross income for 2018.

2.Determine Gerald and Patty's itemized deductions.

3.Determine Gerald and Patty's taxable income.