John and Kathy are married with two children. John has two children from a previous marriage. He paid alimony of $28,000 and child support of $19,000 to his ex-spouse. John has a written agreement as the non-custodial parent to claim the two children that live with his ex-spouse as his dependents.

John has wages of $180,000 ($29,500 in withholding) and Kathy has wages of $27,000 ($10,250 in withholding). John received $1,100 in interest from is savings account. He also received dividends of $1,200 from his stock invested in Exxon. Kathy received $3,000 in unemployment ($600 in withholding). They paid $4,000 in taxes when they filed for an extension.

John has rental property (an apartment) that he receives $18,000. He paid the following expenses for the rental property: $400-advertising, $500 in cleaning, $1,200 for insurance, $350 in legal fees related to preparing the rental agreement, $2,800 for the mortgage interest, $1,200 supplies, $200 in repairs, and $1,800 in real estate taxes. He did not materially participate in the business.

Kathy has a small bookkeeping business. Her father gave her a gift of $20,000 in order to start her business. Her gross sales are $52,000. She paid the following expenses for her business: $500 in advertising, $10,500 for contract labor, $1,200 for insurance, $1,500 in legal fees for setting her business up, $4,800 for rent, $1,600 for office supplies, $750 for licenses, $2,600 for utilities, and $700 for miscellaneous office expenses.

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