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 |
6,000 |
|
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 |
7,700 |
|
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.