PART 1. Jim and Ginger are married and wish to file a joint return for 2018. They have one dependent child, Hannah (age 15), who lives with them. Jim and Ginger have the following items of income and expense for 2018:

Income:
Jims salary	$120,000
Gingers salary	125,000
Interest income on State of Arizona bonds	3,000
Interest income on US Treasury bonds	6,000
Qualified cash dividends	8,000
Regular (nonqualified) cash dividends	8,500
FMV of shares received from stock dividend	9,500
Share of Hollywood Partnership loss*	(12,000)
Share of Gonzaga Corporation (an electing S corporation) income**	30,000
Life insurance proceeds received on the death of Jims mother	100,000
Short-term capital gains	6,000
Short-term capital losses	(10,000)
25% Long-term capital gains	18,000
15% Long-term capital gains	30,000
15% Long-term capital losses	(5,000)
Expenses:
Traditional IRA Contributions	11,000
Home mortgage interest ($300,000 principal)	18,000
Home equity loan interest ($75,000 principal)	6,000
Vacation home loan interest ($120,000 principal)	9,600
Car loan interest	3,000
Home property taxes	6,000
Vacation home property taxes	1,800
Car tags (ad valorem part)	950
Arizona income tax withheld	12,000
Federal income taxes withheld	48,000
Arizona sales taxes paid	9,500
Medical insurance premiums (not part of an employer plan)	12,000
Unreimbursed medical bills	10,000
Charitable contributions	13,500

* Jim and Ginger invested $15,000 as limited partners in the Hollywood Partnership at the beginning of 2018. The loss is not the result of real estate rentals. Neither Jim nor Ginger materially participate.

** Ginger is a 50% owner and President of Gonzaga. She materially participates in the corporation.

REQUIRED: Determine Jim and Gingers tax liability, 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.

PART 2. Jim and Ginger have purchased several bond mutual funds in Hannahs name. During 2018, the bonds earned $5,000 of taxable interest. Hannah also earned $1,800 from babysitting.

REQUIRED: Determine Hannah tax liability, using the tax formula. Label all work.