John and Carol are married and have two dependent children, who are both 17 years old, live at home, and attend high school. John works as a corporate tax accountant. Carol is self-employed and runs a small shop that sells herbs and homemade jams and sauces. Carol’s business income qualifies for the full 20% qualified business income deduction. Neither parent is blind or over age 65, and they plan to file jointly.

John’s salary                                                                             200,000
John’s cash bonus                                                                     40,000
Gift from Carol’s father                                                            25,000
Interest income from bank account                                        1,650
Interest income from U.S. Treasury bonds                            7,740
Interest from municipal bond funds                                       8,200
Appreciation of stock held in retirement account              82,000
Qualified dividends                                                                  18,000
Federal income tax withheld from John’s compensation  50,700
State income tax withheld from John's compensation        6,400
OASDI + MHI withheld from John's compensation               7,482
Real estate tax on home                                                         18,200
State sales tax paid                                                                    2,200
Home mortgage interest (acquisition debt = $650k)         14,000
Interest on credit card debt                                                     2,300
Unreimbursed medical expenses                                           1,700
Gross income from Carol’s business                                     14,800
Advertising and other business expenses for Carol’s business 3,250
Cash contributions to the qualified charities                        20,000
John and Carol sold 1,000 shares of FlubCo stock for $8,000. They also paid a commission equal to 0.5% of the sales price. Their basis in the shares sold was  $15,000.
Carol would like to become a social worker and enrolled in a part-time master’s program at the local university. Carol already holds a bachelor’s degree. She incurred $5,600 of fees for tuition and required fees
In February, John exercised 5,000 stock options. The options had a strike price of $21. John exercised the options when the shares were trading at $30. John held all the shares at the end of the year but plans to sell all the shares in December of 2020.

- Discuss any expenses they incurred during the year for which they did not get a tax benefit.
-List any carryovers they have that will extend to 2020.
-State whether or not they have an underpayment penalty for 2019. The taxpayers’ AGI in 2018 was $305,000 and their total tax liability was $45,227.
-Discuss the reason the taxpayers do or do not owe “other taxes” including self-employment tax, net investment income tax, and the additional Medicare tax.