Note: This problem is for the 2018 tax year.

Alton Newman, age 67, is married and files a joint return with his wife, Clair, age 65. Alton and Clair are both retired, and during 2018, they received Social Security benefits of $10,000. Both Alton and Clair are covered by Medicare. Alton's Social Security number is 111-11-1119, and Clair's is 123-45-6786. They reside at 210 College Drive, Columbia, SC 29201.

Alton, who retired on January 1, 2018, receives benefits from a qualified pension plan of $2,750 a month for life. His total contributions to the plan (none of which were deductible) were $168,250. In January 2018, he received a bonus of $2,000 from his former employer for service performed in 2017. No income taxes were withheld on this bonus by his former employer (Amalgamated Industries, Inc.; EIN 12-3456789; 114 Main Street, Columbia, SC 29201). Although Amalgamated Industries, Inc., accrued the bonus in 2017, it was not paid until 2018.

Clair, who retired on December 31, 2017, started receiving benefits of $1,400 a month on January 1, 2018. Her contributions to the qualified pension plan (none of which were deductible) were $74,100.

On September 27, 2018, Alton and Clair received a pro rata 10% stock dividend on 600 shares of stock they owned. They had bought the stock on March 5, 2011, for $20 a share. On December 16, 2018, they sold the 60 dividend shares for $55 a share.

On October 10, 2018, Clair sold the car she had used in commuting to and from work for $17,000. She had paid $31,000 for the car in 2012.

On July 14, 2010, Alton and Clair received a gift of 1,000 shares of stock from their son, Thomas. Thomas's basis in the stock was $35 a share (fair market value at the date of gift was $25). No gift tax was paid on the transfer. Alton and Clair sold the stock on October 8, 2018, for $24 a share.

On May 1, 2018, Clair's mother died, and Clair inherited her personal residence. In February 2018, her mother had paid the property taxes for 2018 of $2,100. The residence had a fair market value of $235,000 and an adjusted basis to the mother of $160,000 on the date of her death. Clair listed the house with a real estate agent, who estimated it was worth $240,000 as of December 31, 2018.

Clair received rent income of $6,000 on a beach house she inherited three years ago from her uncle Charles. She had rented the property for one week during the July 4 holiday and one week during the Thanksgiving holiday. Charles's adjusted basis in the beach house was $150,000, and its fair market value on the date of his death was $240,000. Clair and Alton used the beach house for personal purposes for 56 days during the year. Expenses associated with the house were $3,700 for utilities, maintenance, and repairs; $2,200 for property taxes; and $800 for insurance. There are no mortgages on the property.

Clair and Alton paid estimated Federal income tax of $2,000 and had itemized deductions of $6,800 (excluding any itemized deductions associated with the beach house). If they have overpaid their Federal income tax, they want the amount refunded. Both Clair and Alton want $3 to go to the Presidential Election Campaign Fund.

Compute their net tax payable or refund due for 2018.

Form 1040 (2018) Alton and Clair Newman 111-11-1119 Page 2 1 Wages, salaries, tips, etc. Attach Form(s) W-2 1 2a 2a Tax-exempt interest Attach Form(s) W- 2. Also attach Form(s) W-2G and 1099-R if tax was withheld. b Taxable interest 2b 3a Qualified dividends 3a b Ordinary dividends 3b 4a IRAs, pensions, and annuities 4a b Taxable amount 4b 5a Social security benefits 5a b Taxable amount 5b 5,829 6 Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 6 7 Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise, subtract Schedule 1, line 36, from line 6 7 45,804 8 Standard deduction or itemized deductions (from Schedule A) 8 9 Qualified business income deduction (see instructions) 9 10 Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter-O- 10 11 1 - Form(s) 8814 Standard Deduction for- Single or married filing separately, $12,000 Married filing jointly or Qualifying widow(er), $24,000 Head of household, $18,000 If you checked a Tax (see inst) (check if any from: 2 Form 4972 30 b Add any amount from Schedule 2 and check here 11 12 a Child tax credit/credit for other dependents b Add any amount from Schedule 3 and check here 12 13 Subtract line 12 from line 11. If zero or less, enter -0- 13 14 Other taxes. Attach Schedule 4. 14 15 Total tax. Add lines 13 and 14 15 any box under Standard deduction, see 16 Federal income tax withheld from Forms W-2 and 1099 16 instructions. 17 Refundable credits: b Sch 8812 a EIC (see inst.) c Form 8863 Add any amount from Schedule 5 17 18 Add lines 16 and 17. These are your total payments 18 Refund 19 19 If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid 20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here 202 Direct deposit? b Routing number 011111111 c Type: Checking Savings See instructions. d Account number 21 Amount of line 19 you want applied to your 2019 estimated tax .. 21 22 Amount Amount you owe. Subtract line 18 from line 15. For details on how to pay, see instructions 22 You Owe 23 Estimated tax penalty (see instructions) > 23 Form 1040 (2018) Alton and Clair Newman 111-11-1119 Page 2 1 Wages, salaries, tips, etc. Attach Form(s) W-2 1 2a 2a Tax-exempt interest Attach Form(s) W- 2. Also attach Form(s) W-2G and 1099-R if tax was withheld. b Taxable interest 2b 3a Qualified dividends 3a b Ordinary dividends 3b 4a IRAs, pensions, and annuities 4a b Taxable amount 4b 5a Social security benefits 5a b Taxable amount 5b 5,829 6 Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 6 7 Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise, subtract Schedule 1, line 36, from line 6 7 45,804 8 Standard deduction or itemized deductions (from Schedule A) 8 9 Qualified business income deduction (see instructions) 9 10 Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter-O- 10 11 1 - Form(s) 8814 Standard Deduction for- Single or married filing separately, $12,000 Married filing jointly or Qualifying widow(er), $24,000 Head of household, $18,000 If you checked a Tax (see inst) (check if any from: 2 Form 4972 30 b Add any amount from Schedule 2 and check here 11 12 a Child tax credit/credit for other dependents b Add any amount from Schedule 3 and check here 12 13 Subtract line 12 from line 11. If zero or less, enter -0- 13 14 Other taxes. Attach Schedule 4. 14 15 Total tax. Add lines 13 and 14 15 any box under Standard deduction, see 16 Federal income tax withheld from Forms W-2 and 1099 16 instructions. 17 Refundable credits: b Sch 8812 a EIC (see inst.) c Form 8863 Add any amount from Schedule 5 17 18 Add lines 16 and 17. These are your total payments 18 Refund 19 19 If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid 20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here 202 Direct deposit? b Routing number 011111111 c Type: Checking Savings See instructions. d Account number 21 Amount of line 19 you want applied to your 2019 estimated tax .. 21 22 Amount Amount you owe. Subtract line 18 from line 15. For details on how to pay, see instructions 22 You Owe 23 Estimated tax penalty (see instructions) > 23