mulative Problems 44. 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. Problem During 2018, the Deans recorded the following receipts. Salaries ($60,000 for Lance, $41,000 for Wanda) Interest income $101,000 City of Albuquerque general purpose bonds Ford Motor Company bonds $1,000 1,100 400 Ally Bank certificate of deposit Child support payments from John Allen Annual gifts from parents Setlement from Roadrunner Touring Company Lottery winnings Federal income tax refund (for tax year 2017) 2,500 7,.200 26,000 90,000 600 400 CHAPTER 5 Computing the Tax Wanda previously was married to John Allen. When they divorced in 2013, 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 support-the 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 to her $90,000 cash in settlement of the personal injuries she sustained The Deans made the following 2018 expenditures Medical expenses (not covered by insurance) Taxes 7,200 Property taxes on personal residence 3,600 State of New Mexico income tax (includes amount withheld from wages during 2018 Interest on home mortgage Gifts to charity Life insurance premiums (policy on Lances ife Contribution to traditional IRA ton Wanda's behalf) Traffic fines Contribution to the reelection campaign fund of the mayor of 42007,800 6,000 3,600 1,200 5,000 300 Santa Fe Funeral expenses for Wayne Boyle 500 6,300 The ife insurance policy was taken out by Lance several years ago and desig- nates 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 Dean household includes the following, for whom they provide more than half of the support. Social Security Number 123-45-6786 123-45-6787 123-45-6788 123-45-6789 123-45-6785 Birth Date ance Dean (age 42 Wanda Dean lage 40) Penny Allen (age 19) Kyle Allen fage 16 Wayne Dean lage 75) 12/16/1976 08/08/1978 0409/1999 06/15/1943 Penny graduated from high school on May 9, 2018, and is undecided about college. This year, she earned $8,500 (placed in a savings account) playing a harp in the lobby of a local hotel. Wayne is Lance's widower father who died on December 20, 2017 Fore the past few years, Wayne qualified as a dependent of the Deans Federal income tax withheld is $4 200 ance) and $2,100 (Wanda). The proper amount of Social Security and Medicare tax was withheld. All members of the family were covered by health insurance for all of 2018 Determine the 2018 Federal income tax for the Deans on a joint returm by com pleting the appropriate forms They do not want to contribute to the Presidential Election Campaign Fund. If an overpayment results, it is to be refunded to them. mulative Problems 44. 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. Problem During 2018, the Deans recorded the following receipts. Salaries ($60,000 for Lance, $41,000 for Wanda) Interest income $101,000 City of Albuquerque general purpose bonds Ford Motor Company bonds $1,000 1,100 400 Ally Bank certificate of deposit Child support payments from John Allen Annual gifts from parents Setlement from Roadrunner Touring Company Lottery winnings Federal income tax refund (for tax year 2017) 2,500 7,.200 26,000 90,000 600 400 CHAPTER 5 Computing the Tax Wanda previously was married to John Allen. When they divorced in 2013, 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 support-the 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 to her $90,000 cash in settlement of the personal injuries she sustained The Deans made the following 2018 expenditures Medical expenses (not covered by insurance) Taxes 7,200 Property taxes on personal residence 3,600 State of New Mexico income tax (includes amount withheld from wages during 2018 Interest on home mortgage Gifts to charity Life insurance premiums (policy on Lances ife Contribution to traditional IRA ton Wanda's behalf) Traffic fines Contribution to the reelection campaign fund of the mayor of 42007,800 6,000 3,600 1,200 5,000 300 Santa Fe Funeral expenses for Wayne Boyle 500 6,300 The ife insurance policy was taken out by Lance several years ago and desig- nates 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 Dean household includes the following, for whom they provide more than half of the support. Social Security Number 123-45-6786 123-45-6787 123-45-6788 123-45-6789 123-45-6785 Birth Date ance Dean (age 42 Wanda Dean lage 40) Penny Allen (age 19) Kyle Allen fage 16 Wayne Dean lage 75) 12/16/1976 08/08/1978 0409/1999 06/15/1943 Penny graduated from high school on May 9, 2018, and is undecided about college. This year, she earned $8,500 (placed in a savings account) playing a harp in the lobby of a local hotel. Wayne is Lance's widower father who died on December 20, 2017 Fore the past few years, Wayne qualified as a dependent of the Deans Federal income tax withheld is $4 200 ance) and $2,100 (Wanda). The proper amount of Social Security and Medicare tax was withheld. All members of the family were covered by health insurance for all of 2018 Determine the 2018 Federal income tax for the Deans on a joint returm by com pleting the appropriate forms They do not want to contribute to the Presidential Election Campaign Fund. If an overpayment results, it is to be refunded to them