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 fee ls the Christmas novelty business has great potential. Mike reports the following for 2018:

For 2017, 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 2018, including self-employment taxes.

b. Are the Webbs subject to AMT in 2018, assuming they have additional AMT preferences of $70,000?

c. Are the Webbs due a refund for 2018?

d. Are the Webbs subject to any underpayment penalties for 2018?

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Salary Consulting practice: Revenues $157,000 $65,000 12,000 $22,000 40,000 Ordinary expenses 53,000 Sole proprietorship: Revenues Ordinary Expenses (18,000) Interest (none tax-exempt) Dividends, qualified 3,000 9,000 $24,000 (4,000) LTCG STCL 20,000 Itemized deductions: State and local taxes (before limitations) Real estate taxes (before limitations) Mortgage interest on personal residence Charitable contributions $14,000 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 $4,000 per year for each child. Nancy is not employed, but is a full-time student (all of 2018) at State University, majoring in Accounting. Federal income tax withheld from salary Estimated taxes paid for 2018 $21,000 14,000