Jack and Jill Hill had the following items of income in 2021. Jack is 63 and Jill is 65. They purchased a 15-year annuity for $46,000. Starting in March, they will receive $375 per month.

Interest on savings account $850
Interest on municipal bonds $625

Jill: Social Security payments $6,000
Wages from ABC Corp. $12,000
Taxable pension $10,000

Jack: Wages from ABC Corp. $30,000
Sick pay due to illness paid by insurance company
(premiums paid by ABC ) $2,000
Cash allowance to pay for meals during work hours $400
Payments by ABC to his qualified pension plan $1,000
Group-term life insurance paid by ABC on insurance
coverage 0f $60,000 $225

On January 1, 2021, Jack invested in two series HH bonds. Bond No. 1 was issued in the name of Peter and his son as co-owners. Bond No. 2 was issued in the name of Jack's son, although Jack was named as the sole beneficiary. In 2021, Bonds No. 1 and No. 2 paid interest of $2,000 and $1,000, respectively. (What is the amount of interest income to be reported by Jack and by his son for 20X1?) The son is not a dependent.

1. Compute their taxable income.

2. Compute their tax liability