Lance H. and Wanda B. Dean are married and live at 431 Yucca Drive, Santa Fe, NM 87501. Lance works for the convention bureau of the local Chamber of Commerce, while Wanda is employed part-time as a paralegal for a law firm.

During 2018, the Deans had the following receipts:

Salaries ($60,000 for Lance, $41,000 for Wanda)				$101,000
Interest income
City of Albuquerque general purpose bonds		$1,000
Ford Motor company bonds		1,100
Ally Bank certificate of deposit		400		2,500
Child support payments from John Allen				7,200
Annual gifts from parents				26,000
Settlement from Roadrunner Touring Company				90,000
Lottery winnings				600
Federal income tax refund (for tax year 2017)				400

Wanda was previously married to John Allen. When they divorced several years ago, Wanda was awarded custody of their two children, Penny and Kyle. (Note: Wanda has never issued a Form 8332 waiver.) Under the divorce decree, John was obligated to pay alimony and child supportthe alimony payments were to terminate if Wanda remarried.

In July, while going to lunch in downtown Santa Fe, Wanda was injured by a tour bus. As the driver was clearly at fault, the owner of the bus, Roadrunner Touring Company, paid her medical expenses (including a one-week stay in a hospital). To avoid a lawsuit, Roadrunner also transferred $90,000 to her in settlement of the personal injuries she sustained.

The Deans had the following expenditures for 2018:

Medical expenses (not covered by insurance)				$7,200
Taxes
Property taxes on personal residence		$3,600
State of New Mexico income tax (includes amount withheld
from wages during 2018)		4,200		7,800
Interest on home mortgage (First National Bank)				6,000
Charitable contributions				3,600
Life insurance premiums (policy on Lance's life)				1,200
Contribution to traditional IRA (on Wanda's behalf)				5,000
Traffic fines				300
Contribution to the reelection campaign fund of the mayor of Santa Fe				500
Funeral expenses for Wayne Boyle				6,300

The life insurance policy was taken out by Lance several years ago and designates Wanda as the beneficiary. As a part-time employee, Wanda is excluded from coverage under her employer's pension plan. Consequently, she provides for her own retirement with a traditional IRA obtained at a local trust company. Because the mayor is a member of the local Chamber of Commerce, Lance felt compelled to make the political contribution.

The Deans' household includes the following, for whom they provide more than half of the support:

	Social Security Number	Birth Date
Lance Dean (age 42)	123-45-6786	12/16/1976
Wanda Dean (age 40)	123-45-6787	08/08/1978
Penny Allen (age 19)	123-45-6788	10/09/1999
Kyle Allen (age 16)	123-45-6789	05/03/2002
Wayne Boyle (age 75)	123-45-6785	06/15/1943

Penny graduated from high school on May 9, 2018, and is undecided about college. During 2018, she earned $8,500 (placed in a savings account) playing a harp in the lobby of a local hotel. Wayne is Wanda's widower father who died on January 20, 2018. For the past few years, Wayne qualified as a dependent of the Deans.

Federal income tax withheld is $4,200 (Lance) and $2,100 (Wanda). The proper amount of Social Security and Medicare tax was withheld.

Required:

Determine the Federal income tax for 2018 for the Deans on a joint return by providing the following information that would appear on Form 1040 and Schedule A. They do not want to contribute to the Presidential Election Campaign Fund. All members of the family had health care coverage for all of 2018. If an overpayment results, it is to be refunded to them.

• Provide the following that would be reported on Lance and Wanda Dean's Form 1040.

• Provide the following that would be reported on Lance and Wanda Dean's Schedule A.

• Use the 2018 Tax Rate Schedules to compute the tax.

  Note: Because the tax rate schedules are used instead of the tax tables, the amount of tax computed may vary slightly from the amount listed in the tables. This variation occurs because the tax for a particular income range in the tax table is based on the midpoint amount.

  2018 Tax Rate Schedules
  SingleSchedule X											Head of householdSchedule Z
  If taxable income is: Over		But not over		The tax is:				of the amount over			If taxable income is: Over		But not over		The tax is:				of the amount over
  $0		$9,525		. . . . . .		10%		$0			$0		$13,600		. . . . . .		10%		$0
  9,525		38,700		$952.50	+	12%		9,525			13,600		51,800		$1,360.00	+	12%		13,600
  38,700		82,500		4,453.50	+	22%		38,700			51,800		82,500		5,944.00	+	22%		51,800
  82,500		157,500		14,089.50	+	24%		82,500			82,500		157,500		12,698.00	+	24%		82,500
  157,500		200,000		32,089.50	+	32%		157,500			157,500		200,000		30,698.00	+	32%		157,500
  200,000		500,000		45,689.50	+	35%		200,000			200,000		500,000		44,298.00	+	35%		200,000
  500,000		. . . . . .		150,689.50	+	37%		500,000			500,000		. . . . . .		149,298.00	+	37%		500,000
  Married filing jointly or Qualifying widow(er)Schedule Y-1											Married filing separatelySchedule Y-2
  If taxable income is: Over		But not over		The tax is:				of the amount over			If taxable income is: Over		But not over		The tax is:				of the amount over
  $0		$19,050		. . . . . .		10%		$0			$0		$9,525		. . . . . .		10%		$0
  19,050		77,400		$1,905.00	+	12%		19,050			9,525		38,700		$952.50	+	12%		9,525
  77,400		165,000		8,907.00	+	22%		77,400			38,700		82,500		4,453.50	+	22%		38,700
  165,000		315,000		28,179.00	+	24%		165,000			82,500		157,500		14,089.50	+	24%		82,500
  315,000		400,000		64,179.00	+	32%		315,000			157,500		200,000		32,089.50	+	32%		157,500
  400,000		600,000		91,379.00	+	35%		400,000			200,000		300,000		45,689.50	+	35%		200,000
  600,000		. . . . . .		161,379.00	+	37%		600,000			300,000		. . . . . .		80,689.50	+	37%		300,000