Mike Webb, married to Nancy Webb, is employed by a large pharmaceutical company and earns a salary. In addition, Mike is an entrepreneur and has two small businesses on the side, both of which operate as sole proprietorships. One is a profitable consulting business where Mike provides financial and retirement advice to pharmacists. The other involves the manufacture of Christmas novelties in China, selling the products in gift shops in the U.S. This business is struggling. However, Mike feels the Christmas novelty business has great potential. Mike reports the following for 2015:

For 2014, Mike and Nancy€™s AGI was $175,000 and their actual federal income tax liability was $29,000.
a. Compute the Webbs regular federal income tax liability for 2015, including self-employment taxes.
b. Are the Webbs subject to AMT in 2015?
c. Are the Webbs due a refund for 2015?
d. Are the Webbs subject to any underpayment penalties for 2015?

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Salary S150,000 Consulting practice Revenues $65,000 Ordinary expenses 12.000 53,000 Sole proprietorship Revenues S22,000 Ordinary Expenses 40,000 18,000) 3,000 9,000 Interest (none tax-exempt) Dividends, qualified LTCG STCL temized deductions $24,000 (4,000) 20,000 State and loc al taxes Real estate taxes Mortgage interest on personal residence Charitable contributions S14,000 8,000 7,000 8.000 37,000 Child care expenses The Webb's have two dependent children, ages 13 and 11, and pay child care expenses of S4,000 per year for each child. Nancy is not employed, but is a full-time student (all of 2015) at State University majoring in Accounting Federal income tax withheld from salary Estimated taxes paid for 2015 S21,000 14,000