Note: This problem is for the 2018 tax year.

Daniel B. Butler and Freida C. Butler, husband and wife, file a joint return. The Butlers live at 625 Oak Street in Corbin, KY 40701. Dan's Social Security number is 111-11-1112, and Freida's is 123-45-6780. Dan was born on January 15, 1967, and Freida was born on August 20, 1968.

During 2018, Dan and Freida furnished over half of the total support of each of the following individuals, all of whom still live at home:

1. Gina, their daughter, age 22, a full-time student, who married on December 21, 2018, has no income of her own and for 2018 did not file a joint return with her husband, Casey, who earned $10,600 during 2018. Gina's Social Security number is 123-45-6788.
2. Willie, their son, age 20, who had gross income of $6,300 in 2018, dropped out of college in October 2018. He had graduated from high school in May 2018. Willie's Social Security number is 123-45-6787.
3. Ben, their oldest son, age 26, is a full-time graduate student with gross income of $5,200. Ben's Social Security number is 123-45-6786.

Dan was employed as a manager by WJJJ, Inc. (employer identification number 11-1111111, 604 Franklin Street, Corbin, KY 40702), and Freida was employed as a salesperson for Corbin Realty, Inc. (employer identification number 98-7654321, 899 Central Street, Corbin, Ky 40701). Selected information from the W-2 Forms provided by the employers is presented below. Dan and Freida use the cash method.

Line Description Dan Freida 1 Wages, tips, other compensation $74,000 $86,000 2 Federal income tax withheld 11,000 12,400 17 State income tax withheld 2,960 3,440 Freida sold a house on December 30, 2018, and will be paid a commission of $3,100 (not included in the $86,000 reported on the W-2) on the January 10, 2019, closing date.

Other income (as reported on 1099 Forms) for 2018 consisted of the following:

Dividends on CSX stock (qualified) $4,200 Interest on savings at Second Bank 1,600 Interest on City of Corbin bonds 900 Interest on First Bank CD 382 Prize 7,000 The $382 from First Bank was original issue discount. Dan and Freida collected $16,000 on the First Bank CD that matured on September 30, 2018. The CD was purchased on October 1, 2016, for $14,995, and the yield to maturity was 3.3%.

During the year, Dan participated on a game show and won a cash prize of $7,000.

In addition to the above information, Dan and Freida's itemized deductions included the following:

Paid on 2018 Kentucky income tax $700 Personal property tax paid 600 Real estate taxes paid 1,800 Interest on home mortgage (Corbin S&L) 4,900 Cash contributions to the United Way 800 Sales tax from the sales tax table is $1,860. Dan and Freida made Federal estimated tax payments of $8,000. All members of the family had health insurance coverage for all of 2018. Dan and Freida do not wish to contribute to the Presidential Election Campaign. The Kentucky income tax rate is 4%.

Required:

Compute Dan and Freida's 2018 Federal income tax payable (or refund due). Use Form 1040 and Schedules 1, 5, B, E and the Qualified Dividends and Capital Gain Tax Worksheet to complete this tax return. If there is a tax overpayment, the Butlers would like a refund. If additional tax is due, assume no underpayment penalty applies.

It may be necessary to complete the tax schedules before completing Form 1040.

• Enter all amounts as positive numbers.
• If an amount box does not require an entry or the answer is zero, enter "0".
• When computing the tax liability, do not round your immediate calculations.
• If required round your answers to the nearest dollar.
• Make realistic assumptions about any missing data.
• Use the Tax Rate Schedule provided. Do not use the Tax Tables.

Complete the Butler's Form 1040.

_Form

1040

_{Department of the TreasuryInternal Revenue Service(99)}

U.S. Individual Income Tax Return 2018 OMB No. 1545-0074 IRS Use Only Filing status: Married filing jointly Your first name and initial

Daniel B. Butler Last name

Your social security number

111-11-1112 Your standard deduction: None If joint return, spouse's first name and initial

Freida C. Butler Last name Spouse's social security number

123-45-6780 Spouse standard deduction: Someone can claim your spouse as a dependent Spouse was born before January 2, 1954 Spouse is blind Spouse itemizes on a separate return or you were dual-status alien Yes Full-year health care coverage or exempt (see inst.) Home address (number and street). If you have a P.O. box, see instructions.

625 Oak Street Apt. no. Presidential Election Campaign

(see inst.)None City, town or post office, state, and ZIP code. If you have a foreign address, attach Schedule 6.

Corbin, KY 40701 If more than four dependents, see inst. and here Dependents (see instructions): (2) Social security number (3) Relationship to you (4) if qualifies for (see inst.): (1) First name Last name Child tax credit Credit for other dependents Gina Butler 123-45-6788 Child No Yes Willie Butler 123-45-6787 Child No Yes

Sign

Here

Joint return? See instructions. Keep a copy for your records.

Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature

Date

Your occupation

Manager If the IRS sent you an Identity Protection PIN, enter it here (see inst.)

Spouse's signature. If a joint return, both must sign. Date Spouse's occupation

Salesperson If the IRS sent you an Identity Protection PIN, enter it here (see inst.)

Paid Preparer Use Only

Preparer's name Preparer's signature

Self-Prepared PTIN Firm's EIN Check if: 3rd Party Designee Self-employed Firm's name Phone no. Firm's address BAA For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Form 1040 (2018)

Form 1040 (2018) Daniel B. and Freida C. Butler 111-11-1112 Page 2 Attach Form(s) W-2. Also attach Form(s) W-2G and 1099-R if tax was withheld. 1 Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . . . . . . . . . . . . 1

2a Tax-exempt interest 2a

bTaxable interest 2b

3a Qualified dividends 3a

bOrdinary dividends 3b

4a IRAs, pensions, and annuities 4a

bTaxable amount 4b

5a Social security benefits 5a

bTaxable amount 5b

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

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 any box under Standard deduction, see instructions. 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 -0- . . . . 10

11 a Tax (see inst) (check if any from: 1 Form(s) 8814

2 Form 4972 3 )

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

16 Federal income tax withheld from Forms W-2 and 1099 . . . . . . . . . . . . . . . . . . . . 16

17 Refundable credits:a EIC (see inst.)

b Sch 8812 c Form 8863

Add any amount from Schedule 5 . . . . . . . . . . . . . . . . . . 17

18 Add lines 16 and 17. These are your total payments . . . . . . . . . . . . . . . . . . . . . 18

Refund 19 If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20a

Direct deposit? b Routing number X X X X X X X X X c Type: Checking Savings

See instructions. d Account number X X X X X X X X X X X X X X X X X

21 Amount of line 19 you want applied to your 2019 estimated tax . . . . . . . . . . . . . . . . . . 21

Amount You Owe 22 Amount you owe. Subtract line 18 from line 15. For details on how to pay, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

23 Estimated tax penalty (see instructions) . . . . . 23

Go to www.irs.gov/Form1040 for instructions and the latest information.

Form 1040 (2018)