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Gerald and Patty Hanson are married taxpayer with the following income and expenses for


·        Gerald's w-2 wages:                                       $80,000

·        Patty's w-2 wages:                                          40,000

·        Patty's sole proprietorship

(Patty is a noted sculptor)

o  Sales                   $20,000

o  Materials             (8,000)

o  Depreciation       (1,000)

·        Interest income on their investments    $5,000

·        Dividend income                                              500

In additional, Gerald and Patty incurred the following expenses:

·        Prescription drugs (after insurance)                                        $450

·        Vitamins                                                                                              100

·        Medical insurance premiums                                                1,350

·        Braces for their son (not covered by insurance)               1,500

·        Clinic and hospital bills (after insurance)                                 800

·        Property taxes on home                                                               5,000

·        State income taxes

o  Withheld from their w-2                                              6,000

o  Estimated payments                                                    400

·        Federal income taxes withheld                                          30,000

·        State and local sales tax paid on new personal auto         1,000

·        Interest on home mortgage                                                    10,000

·        Interest paid on credit cards                                                 2,400

·        Cash contributions to church                                                  3,000

·        Contribution of ABC stock to United Way

(FMV $10,000, adjusted basis $2,000)

·        Patty donated a sculpture to the local art museum

The sculpture was appraised at $5,000.

·        Gerald, a CPA, paid $300 for his CPA license. His employer does not reimburse the cost for the license.

In addition, Gerald and Patty drove 300 miles this year for medical and dental treatments. Patty also drove 1000 miles to attend a conference for her church. Patty was not a delegate to this conference.


1.        Determine Gerald and Patty's adjusted gross income for 2018.

2.      Determine Gerald and Patty's itemized deductions.

3.      Determine Gerald and Patty's taxable income.

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