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 proprietorship. One is a profitable consulting business where Mike provides Financial and retirement assistance 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. In 2014, Mike reports the following:

Salary $150,000

Consulting practice: Revenues $65,000

Ordinary expenses $ 12,000 53,000

Sole proprietorship: Revenues $22,000

Ordinary Expenses $40,000 (18,000)

Interest (none tax-exempt) 3,000

Dividends, qualified 9,000

LTCG $24,000

STCL $(4,000) 20,000

Itemized deductions:

State and local taxes $ 14,000

Real estate tax 5,000

Mortgage interest on personal residence 10,000

Charitable contributions 8,000 37,000

Child care expenses:

And pay child care expenses of $4,000 per year for each

Child. Nancy is not employed, but is full- time

Student (all of 2014) at state university, majoring in

Accounting.

Federal income tax withheld from salary $ 21,000

Estimated taxes paid from 2014 14,000

For 2013, Mike and Nancy