Alexander (Alex) A. and Isabel P. Hill are married and live at 4692 Calhoun Drive, Charleston, South Carolina 29402. Alex is the director of the Tourist and Convention Bureau for the city of Charleston, while his wife is employed part-time as a physical therapist by an orthopedic clinic. During 2011, the Hills recorded the following receipts. Salaries ($60,000 for Alex, $42,000 for Isabel) $102,000 Interest income- City of Columbia general purpose bonds $3,000 Boeing Corporation bonds 2,100 Ally Bank certificate of deposit 900 Child support payments from John Morris 7,200 Annual gifts from parents 30,000 Settlement from Sumter Touring Company 80,000 Lottery winnings 900 Fees paid to Isabel for serving on a grand jury 1,300 Isabel previously was married to John Morris. When they divorced several years ago, Isabel was awarded custody of their two children, Emily and Jacob. (Isabel never issued a Form 8332 waiver.) Under the divorce decree, John is obligated to pay alimony and child support-the alimony payments were to terminate if Isabel remarried. In July, while going to lunch in downtown Charleston, Isabel was injured by a tour bus. As the driver was clearly at fault,
the owner of the bus, Sumter Touring Company, paid her medical expenses (including a one-week stay in a hospital). To avoid a lawsuit, Sumter also transferred to her $80,000 in settlement of the personal injuries she sustained. The Hills incurred the following expenditures for 2011. Medical expenses (not covered by insurance) $8,900 Taxes- Property taxes on personal residence $3,800 State of South Carolina income tax (includes amount withheld from wages during 2011) 3,900 Interest on home mortgage 6,200 Paid church pledge 3,800 Life insurance premiums (policy on Alex's life) 1,500 Contribution to traditional IRA (on Isabel's behalf) 5,000 Traffic fines 200 Contribution to the reelection campaign fund of the mayor of Charleston 400 Funeral expenses for Wayne Boyle 5,900 Nonreimbursed expenses incurred by Isabel in connection with her jury duty (e.g., transportation and parking) 120 Lottery losses (i.e., tickets purchased that did not win a prize) 1,100 The life insurance policy was taken out by Alex several years ago and designates Isabel as the beneficiary. As a part-time employee, Isabel is excluded from coverage under her employer's pension plan. Consequently,
she provides for her own retirement with a traditional IRA obtained at a local trust company. Because the mayor evaluates Alex's performance as Director of the Tourist and Convention Bureau, Alex felt compelled to make the political contribution. The Hills keep a record of their lottery activity and are able to substantiate their winnings and losses. The Hills' household includes the following, for each of whom they provide more than half of the support. Social Security Number Birth Date Alex Hill (age 42) 123-45-6786 12/16/1969 Isabel Hill (age 40) 123-45-6787 08/08/1971 Emily Morris (age 19) 123-45-6788 10/09/1992 Jacob Morris (age 17) 123-45-6789 05/03/1994 Walter Hill (age 75) 123-45-6785 06/15/1936 Emily graduated from high school on May 9, 2011, and is undecided about college. During 2011, she earned $9,500 (placed in a savings account) playing a piano in the lobby of a local hotel.
Walter is Alex's widower father who died on January 20, 2011. For the past few years, Walter qualified as a dependent of the Hills. Federal income tax withheld is $5,500 (Alex) and $3,400 (Isabel). The proper amount of Social Security and Medicare tax was withheld. Determine the Federal income tax for 2011 for the Hills on a joint return by completing the appropriate forms. They do not want to contribute to the Presidential Election Campaign Fund. If an overpayment results, it is to be refunded to them. Suggested software: H&R BLOCK At Home.