Jack and Jill Wells had the following items of income in 2021. Jack is 63 and Jill is 65.

Interest on savings account $850

Interest on municipal bonds $625

Jill:

Social Security payments $6,000

Wages from ABC Corp. $12,000

Life-time, purchased for $25,000. In January, Jill will receive $200 per month for the length of her life. (Determine how much must be included in her income.)

Jack:

Wages from ABC Corp. $30,000

Compensatory damages as a result of inadvertent

poisoning at a local restaurant. $10,000

Cash allowance to pay for meals during work hours $500

Payments by ABC to his qualified pension plan $1,000

ABC Corporation pays the premiums on an $80,000 group-term life insurance policy on the life of Jack Wells, vice-president. Jack has paid $50 toward the cost of the insurance.

Compute their taxable income. (30 points)

Compute their tax liability. (10 point)