st ax:

AnculmalNote: This problem is for the $2021$ tax year.

Daniel B$.$ Butler and his spouse Freida C$.$ Butler 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 $15,1970,$ and Freida was born on August $20,1971.$

During $2021,$ Dan and Freida furnished over half of the total support of each of the following individuals, all of whom still live at home:

Gina, their daughter, age $22,$ a full$-$time student, who married on December $21,$ has no income of her own and did not file a joint return with her husband, Casey, who earned $$10,600$ during $2021.$ Gina's Social Security number is $123-45-6788.$

Willie, their son, age $19,$ graduated high school in May $2021.$ He is taking a leap year and will not begin college until $2022.$ He had gross income of $$6,300$ in $2021.$ Willie's Social Security number is $123-45-6787.$

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 $11,00012,400$

$17$ State income tax withheld $2,9603,440$

Freida sold a house on December $30,2021,$ and will be paid a commission of $$3,100($not included in the $$86,000$ reported on the W$2)$ on the January $10,2022,$ closing date.

Other income $($as reported on $1099$ Forms$)$ for $2021$ 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 $$382$ from First Bank was an original issue discount. Dan and Freida collected $$16,000$ on the First Bank CD that matured on September $30,2021.$ The CD was purchased on October $1,2018,$ for $$14,995,$ and the yield to maturity was $3\mathrm{.}3\%.$

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 $2021$ Kentucky income tax $$700$

Personal property tax paid $600$

Real estate taxes paid $1,800$

Interest on home mortgage $($Corbin S&L$)4,900$

Sales tax from the sales tax table is $$1,860.$ Dan and Freida made Federal estimated tax payments of $$8,000.$ They have never owned or used any virtual currency, and they do not wish to contribute to the Presidential Election Campaign. For $2021,$ they received the correct amount of economic impact payments $(2021$ recovery credits$).$ The Kentucky income tax rate is $4\%.$

Required:

Compute Dan and Freida's $2021$ Federal income tax payable $($or refund due$).$ Use Form $1040$ and Schedules $1,$ B$,8812$ 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.