utation Problem Decision Making Communications 59. Daniel B. Butler and Freida C. Butler, husband and wife, file a joint return. The Butlers and Freida's is 123-45-6789. Dan was born on January 15, 1967, and Freida was born During 2018, Dan and Freida fumished over half of the total support of each of live at 625 Oak Street in Corbin, KY 40701. Dan's Social Security number is 111-11-1112, on August 20, 1968 the following individuals, all of whom still live at home a. Gina, their daughter, age 22, a full-time student, who married on December 21, 2018, has no income of her own and for 2018 did not file a joint return with her is 123-45-6788 Social Security number is 123-45-6787 of $5,200. Ben's Social Security number is 123-45-6786. husband, Casey, who earned $10,600 during 2018. Gina's Social Security number b. Sam, their son, age 20, who had gross income of $6,300 in 2018, dropped out of college in October 2018. He had graduated from high school in May 2018. Sam's c. Ben, their oldest son, age 26, is a full-time graduate student with gross income Dan was employed as a manager by WIII, Inc. (employer identification number 11-111111, 604 Franklin Street, Corbin, K 40702), and Freida was employed as a salesperson for Corbin Realty, Inc. (employer identification number%.765 21H9 Central Street, Corbin, KY 40701D. Selected information from the W-2 Forms pro- vided by the employers is presented below. Dan and Freida use the cash method Dan 1 2 17 Wages, tips, other compensation Federal income tax withheld State income tax withheld 586,000 $74000 12.400 11,000 2,960 3,440 Freida sold a house on December 30, 2018, and will be paid a commission of $3,100 (not included in the $86,000 reported on the W-2) on the January 10, 2019 closing date. Other income (as reported on 1099 Forms) for 2018 consisted of the following Dividends on CSX stock (qualified) Interest on savings at Second Bank Interest on City of Corbin bonds Interest on First Bank CD $4,200 1,600 900 382 The $382 from First Bank was original issue discount. Dan and Freida collected $16,000 on the First Bank CD that matured on September 30, 2018. The CD was purchased on October 1, 2016, for $14,995, and the yield to maturity was 33%. Dan received a Schedule K-1 from the Fakcon Partnership, which showed his distributive share of income as $7,000. In addition to the above information, Dan and Freida's itemized deductions included the following $ 700 Paid on 2018 Kentucky income tax Personal property tax paid Real estate taxes paid Interest on home mortgage (Corbin S&) Cash contributions to the Boy Scouts 800 Sales tax from the sales tax table is $1,860. Dan and Freida made Federal estimated tax payments of $8,000. All members of the family had health insurance coverage for all of 2018. Dan and Freida do not wish to contribute to the Presidential Election Campaign. The Kentucky income tax rate is 4%. Part 1-Tax Computation Compute Dan and Freida's 2018 Federal income tax payable (or refund due). If you use tax forms for your computations, you will need Form 1040 and Schedules A, B, and E (if available). Part 2-Tax Planning Dan plans to reduce his work schedule and work only half-time for WIIl in 2019. He has been writing songs for several years and wants to devote more time to devel- oping a career as a songwriter. Because of the uncertainty in the music business, however, he would like you to make all computations assuming that he will have no income from songwriting in 2019. To make up for the loss of income, Freida plans to increase the amount of time she spends selling real estate. She estimates that she will be able to earn $90,000 in 2019. Assume that all other income and expense items will be approximately the same as they were in 2018. Assume that Sam will be enrolled in college as a full-time student for the summer and fall semesters. Will the Butlers have more or less disposable income (after Federal income tax) in 2019 Write a letter to the Butlers that contains your advice, and prepare a memo for the tax files