1. P and J are a married couple with the following items of income for 2014:

P wages $45,000

State tax refunds $5,000

J unemployment $2,750

Dividends $400

Interest income $350

J Social Security $18,000

P is a flight attendant who occasionally takes advantage of the airlines friends and family benefits where P and J can fly for free on certain flights at certain times. The only restriction on the use of the flights by P and J is that the flight cannot be full, otherwise, they can fly anywhere in the world. P and J took flights costing $4,000 during the year when compared to regular passenger costs. A review of their 2013 tax return shows they deducted $1,200 of state income taxes on their federal return.

P and J also have the following deductions:

Interest on home mortgage $5,000

State income taxes $2,500

State sales taxes $1,000

Property taxes $1,500

Charitable contributions $300

Contributions to congressman $400

Airline uniform costs $300

Calculate P and Js 2014 Adjusted Gross Income (AGI) as well as their taxable income. Presume that their personal exemptions total $7,000 and they will file a married filing joint tax return. If you are excluding any of the above items from either income or deductions, provide an explanation as to why. Show your calculations.