H, age 28, and W, age 27, are married with a 1-month old son. W and Walways file jointly. W and Ware both accountants and each is paid a salary of $50,000, H is also a parther in DEF partnership. He is a 40% owner. The partnership had total income of $20,000 in 2023 and distributed $4,000 to H in 2023, In addition to the above income

H and W received the Following in 2023

$3,000 qualified cash dividend on XYZ, Inc. stock.

$2,000 interest on State of Wyoming bonds that H owns

$4,000 on interest from a saving account that H and W own together.

W received a fountain pen worth $150 from her employer in recognition of her outstanding work for a big tax elient.

W and H received $2,000 refund in 2023 on their 2022 state income taxes. Their itemized deductions in 2022 totaled $26,000.

The accounting firm provides W with $300,000 of group term life insurance protection. The firm provides all full-time employees with group term insurance. W has worked for the firm all year. (Under the Uniform Premiums, the cost per $1,000 of protection per month is .06C for a 25-29 year old.)

H's firm pays $195 a month for H to take public transit to work every month.

W sold stock for $5,000. She paid $4,000 for it 10 months ago.

'The firm provides W with $6,000 for child care all of which she used to pay a nanny to take care of her 2-year-old.

W's employer paid $1,500 for W to take a course in Partnership Taxation at the local college.

H's firm pays for a gym membership for H at the local YMCA which costs $480 a year.

H was infured on the job in 2023 and received worker's compensation in the amount of $3,000.

W's brother passed away in February 2023 leaving W stock valued at $20,000

W's mother gave her a gift of $30,000 in 2023.

H received $150,000 in life insurance when his father died.

H purchased an annuity years ago for 15,000. The annuity will pay 5,000 for 5 years. In 2023 H received the first 5,000.

H paid $4,000 in alimony to his ex-wife (2016 divorce) and $6,000 in child support.

H and W paid state income taxes of $5,000, real estate taxes of $6,000, qualified mortgage interest of 7,000, medical expenses of $2,000, and qualified charitable contributions of $4,000.

(a) What items are excluded from gross income?

(b) What is H and W's gross income? (show work below.

(c) What is H and W's adjusted gross income?(show work below).

(d) What is H and W's taxable income?(show work below)

(e) What is H and W's tax liability for 2023? (show work below; round to the nearest whole dollar)