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.

Salary $150,000

Consulting Practice: Revenues $65,000 Ordinary Expenses $12,000 $53,000

Sole Proprietorhip: Revenues $22,000 Ordinary Expenses $40,000 ($18,000)

Interest (non-exempt) $3,000

Dividents (qualified) $9,000

LTCG $24,000

STCL ($4,000) $20,000

Itemized deductions:

State & Local Taxes $14,000

Real Estate Taxes $8,000

Mortgage interest on personal residence $7,000

Charitable contributions $8,000 $37,000

Child care expenses: The Webbs have to 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 2015) at State University, majoring in Accounting.

Federal income tax withheld from salary $21,000

Estimated taxes paid for 2015 $14,000

For 2014, Mike and Nancys AGI was $175,000 and their actual federal income tax liability was $29,000.

Compute the Webbs regular federal income tax liability for 2015, including self-employment taxes.

Are the Webbs subject to AMT in 2015?

Are the Webbs due a refund in 2015?

Are the Webbs subject to any underpayment penalties for 2015?