Leroy and Amanda are married and have 3 dependent children. During the current year, they have the following income and expenses:

Salaries .................................... $120,000

Interest income .............................. 45,000

Royalty income ............................. 27,000

Deductions for AGI ........................ 3,000

Deductions from AGI ...................... 9,000

a. What is Leroy and Amanda's current year taxable income and income tax liability?

b. Leroy and Amanda would like to lower their income tax. How much income tax will they save if they validly transfer $5,000 of the interest income to each of their children? Assume that the children have no other income, and that they are entitled to a $1,000 standard deduction, but are not allowed a personal exemption deduction.