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 W2 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 W2) 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

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%.

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 Freidas 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)