PART 1. Anthony and Kate are married and wish to file a joint return for 2021. They have two dependent children, Ben (age 19 and a full-time student) and Mary (age 15), who live with them. Their primary residence is in Phoenix, and they own a condo (2^nd home) in Flagstaff. They also own a rental house in Mesa. Anthony and Kate have the following items of income and expense for 2021:

Income:
Anthonys salary	$ 100,000
Kates salary	110,000
Interest income on City of Mesa bonds	7,500
Interest income on US Treasury bonds	8,000
Qualified cash dividends	12,000
Regular (ordinary) cash dividends	10,000
FMV of 500 shares of Whistle Co. common stock received as a stock dividend	2,500
Net rental income from 100% owned rental house*	7,500
Share of Sharma Partnership loss**	(10,000)
Share of Viscount S Corporation income***	25,000
Life insurance proceeds received on the death of Anthonys father	100,000
Short-term capital gains	8,000
Short-term capital losses	(12,000)
15% Long-term capital gains	30,000
15% Long-term capital losses	(5,000)
Expenses:
Home mortgage interest ($400,000 principal)	22,000
Home equity loan interest ($110,000 principal)	6,600
Condo loan interest ($75,000 principal)	6,000
Car loan interest	5,000
Credit card finance charges	2,200
Home property taxes	5,000
Condo property taxes	4,000
Condo maintenance fees	2,400
Car tags (ad valorem part)	1,500
Arizona income tax withheld	8,000
Arizona sales tax estimate	7,000
Federal income taxes withheld	35,000
Medical insurance premiums (paid by Anthony & Kate, not part of an employer plan)	10,000
Unreimbursed medical bills	8,000
Charitable contributions	5,000
Unreimbursed employee business expenses	7,500
Contributions to Traditional IRA plans	12,000

* The rental house does not meet the definition of a qualified trade or business for purposes of the 199A deduction.

** Anthony and Kate invested $25,000 as limited partners in the Sharma Partnership at the beginning of 2021 . The loss is not the result of real estate rentals. Neither materially participate in the operations of the partnership.

*** Kate is a 75% owner and President of Viscount.

REQUIRED: Determine Anthony and Kates net tax due or refund, using the tax formula. You must label your work, provide supporting schedules for summary computations, and indicate any carryovers. Present your work in a neat, orderly fashion.

(Check figures: AGI = $274,000; Taxable Income = $226,000)