H, age 45, and W, age 43, are married with two dependent children: M, age 18, and N,

age 19. Both are full-time students at a local university. H, who is president of a local

bank, is paid a salary of $125,000. He also is the sole proprietor of a jewelry store that

had a net profit for 2015 of $75,000. W, a registered nurse at a large hospital, is paid

a salary of $50,000. In addition to the above income, H and W received the following

during 2015:

a. $3,000 cash dividend on ABC, Inc. stock, which they own jointly. They paid

$25,000 for the stock three years ago and it has a current market value of $40,000.

ABC, Inc. has $300,000 of current and accumulated E&P.

b. $750 in interest on State of Michigan bonds that H owns.

c. $7,000 in interest on corporate bonds that H and W purchased two years ago at

face value for $100,000.

d. W received a check for $400 from her employer in recognition of her outstanding

service to the hospital during the past 10 years.

e. The bank provides H with $90,000 of group term life insurance protection. The

bank provides all full-time employees with group term insurance.

f. 1,000 shares of XYZ common as a stock dividend. Prior to the distribution, H and

W owned 9,000 shares of common with a basis of $15,000. H and W did not have

the right to receive cash or other assets in lieu of the stock.

g. Because W must be available should an emergency arise, she is required to eat

her lunches in the hospital cafeteria. The value of the free meals provided by her

employer during 2015 was $1,100.

h. Hs grandfather passed away in February 2015, leaving H a 400-acre farm in

southern Illinois valued at $500,000. H rented the land to F, a neighboring farmer,

for $13,000.

i. In order to drain off the excess surface water from 10 acres, F (see (h) above)

installed drainage pipe at a cost of $1,500.

j. W sold 50 shares of DEF stock for $100 per share. She bought the stock four

years ago for $1,800.

k. H received a dividend check for $280 from the MNO Mutual Life Insurance

Company. H purchased the policy in 2002, and W is the primary beneficiary.

l. H and Ws only itemized deductions were interest on their home mortgage, $18,000;

property taxes on their home, $4,000; and charitable contributions, $6,000.

m. The hospital withheld $11,000 of Federal income taxes on Ws salary and the appropriate

amount of FICA taxes. The bank withheld $30,000 in Federal income

taxes from Hs salary and the appropriate amount of FICA taxes. Furthermore,

Hs quarterly estimated tax payments for 2015 total $35,000.

Calculate H and Ws 2015 Federal income tax assuming they file a joint return.