Pearson\'s Federal Taxation (2018 Edition, Individuals), Chapter 14 exercice 68.

Question

Pearson's Federal Taxation (2018 Edition, Individuals), Chapter 14 exercice 68. Tahnks for the help !

COMPREHENSIVE PROBLEM 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 I:14-68 2 Individuals Chapter 14 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. Mik e reports the following for 2017 Salary Consulting practice: $150,000 Revenues Ordinarye S65,000 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 Itemized deductions $24,000 4,000) 20,000 State and local taxes Real estate taxes Mortgage interest on personal residence $14,000 8,000 7,000 8,000 Charitable contributions 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 2017) at State University, majoring in Accounting. Federal income tax withheld from salary Estimated taxes paid for 2017 $21,000 14,000 For 2016, Mike and Nancy's AGI was $175,000 and their actual federal income tax lia- bility was $29,000 a. Compute the Webbs regular federal income tax liability for 2017, including self employment taxes. b. Are the Webbs subject to AMT in 2017? c. Are the Webbs due a refund for 2017? d. Are the Webbs subject to any underpayment penalties for 2017?

Explanation / Answer

less : tax on Federal Income(actual) $21000

Net payment $9060

b. Yes,since the liability tax arises payment of federal tax income also arises.

C. No, there is no refund ,Tax has to be paid on income

D.Yes,since tax liabilty arises any short payment of tax may arise default and assesse will be liable to pay interest on the amount

Gross income $175,000 Qualified plan contributions - $0 Adjusted gross income = $175,000 Standard/Itemized deductions - $12,700 Personal exemptions - $8,100 Taxable income = $154,200 Tax liability before credits $30,060 Child tax credits - $0 Estimated tax liability = $30,060

less : tax on Federal Income(actual) $21000

Net payment $9060

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