9) Lance and Wanda Dean are married. Lance works for the convention bureau of the local Chamber of Commerce, while Wanda is employed part-time by a law firm as a paralegal.
During 2013, the Deans had the following receipts:
Salaries ($60,000 for Lance, $41,000 for Wanda)....................$101,000
Interest income-
City of Albuquerque general purpose bonds $1,000
Ford Motor Company bonds 1,100
Ally Bank certificate of deposit 400 2,500
Child support payments from John Allen 7,200
Annual gifts from Lance's parents 26,000
Settlement from Roadrunner Touring Company 90,000
Lottery winnings 600
Federal tax refund (for tax year 2012) 400
Wanda was previously married to John Allen. When they divorced several years ago, Wanda was awarded custody of their two children, Penny and Kyle. Under the divorce decree, John was obligated to pay alimony and child support - the alimony payments were to terminate if Wanda remarried.
In July, while going to lunch in downtown Santa Fe, Wanda was injured by a tour bus. As the driver was clearly at fault, the owner of the bus, Roadrunner Touring Company, paid her medical expenses (including a one-week stay in a hospital). To avoid a lawsuit, Roadrunner also transferred to her $90,000 in settlement of the personal injuries she sustained.
The dean made the following expenditures in 2013
Medical expense (not covered by insurance) $7,200
Taxes
Property taxes on personal residence $3,600
State of New Mexico income tax(include
amount witheld from wages during 2013) 4,200
Total taxes 7,800
Interest on home mortgage 6,000
Paid church pledge 3,600
Life insurance premiums (policy on Lance's life) 1,200
Contribution to IRA (on Wanda's behalf) 5,000
Traffic fines 300
Contribution to the reelection campaign fund of the
mayor of santa fe 500
Funeral expense for Wayne Boyle 6,300
The life insurance policy was taken out by Lance several years ago and designates Wanda as beneficiary. As a part-time employee, Wanda is excluded from coverage under her employer's pension plan. She provides her own retirement with a traditional IRA. Because the mayor is a member of the local Chamber of Commerce, Lance felt compelled to make the political contribution.
The Deans' household includes the following, for whom they provide more than half of the support:
Lance Dean (age 42) social security abcd
Wanda Dean (age 40)
Penny Allen (age 19)
Kyle Allen (age 17)
Wayne Boyle (age 70)
Penny graduated from high school on May 9, 2013 and is undecided about college. During 2013, she earned $8,500 (placed in a savings account) playing a harp in the lobby of a local hotel. Wayne is Wanda's widower father who died on January 10, 2013. For the past few years, Wayne qualified as a dependent of the Deans.
Federal income tax withheld is $5,200 (Lance) and $3,100 (Wanda). The proper amount of Social Security and Medicare tax was withheld.
Determine the Federal income tax for the Deans on a joint return. They do not want to contribute to the Presidential election campaign fund.
Prepare form 1040 and schedule A