This is a Earning and Profit problem in Tax 2 class. Have to do a form 1120 and a M=1. That is all the information that I have. I have no idea how to do this.

Monsters, Inc. has one class of voting common stock, of which 1,000 shares are issued and outstanding. The shares are owned as follows:

Vincent Price 400

Bela Lugosi (Vinnies dad) 175

Boris Karloff (Vinnies cousin) 100

Lon Chaney (Vinnies grandfather, no relation to Bela) 100

Faye Wray (Vinnies daughter) 125

Anthony Perkins 100

Total 1,000

Monsters, Inc. has revenue of $500,000, including dividends from a 12% owned company of $10,000 and tax exempt interest income of $3000. Monsters also has ordinary business expenses of $189,000 (including Life Insurance premiums for employee owned policies of $8,000, life insurance premiums on officers lives with the company as the beneficiary of $5,000, interest on a loan to purchase a tax exempt bond of $1,000); additionally they have a DPAD of $5,000 for 2016. Also, the company donated $50,000 to the Alzheimers Association in 2016, utilized an $8,000 NOL carryover and had no NOL or capital loss carrybacks. During 2016 the company paid federal tax expense of $88,740 and recorded the same amount on their income statement (not included in the ordinary business expenses above.) Monsters, Inc, has accumulated E&P at January 1, 2016 of $500,000.

During 2016, the corporation made the following distributions to its shareholders:

03/31: Paid a dividend of $10/share to each shareholder ($10,000 in total).

06/30: Redeemed 250 shares of Vinnies stock for $250,000. Vinnies basis in the 250 shares redeemed was $175,000. Each of his shares had the same basis.

10/31: Redeemed 70 shares of Boriss stock for $40,000. His basis in the 70 shares was $28,000. Each of his shares had the same basis.

12/31: Paid a dividend of $15/share to each shareholder.

a. Determine book income and determine taxable income using Form 1120 page 1 and Schedule M 1 to show your work, in addition to any other workpapers required.

b. Determine the tax status of each distribution made during 2016 and the tax treatment required by each shareholder.

c. What is Vincent Prices basis in his remaining stock?

d. What is Boris Karloffs basis in his remaining stock?

e. What is accumulated E&P at December 31, after the last distribution of the year?

Prepare all workpapers in a neat and organized fashion. Please turn in the assignment in the following order:

Form 1120 page 1

Form 1120 page 5

E & P calculations, answers clearly labeled using the appropriate letters from above.

Any workpaper required to show supporting calculations for those 2 forms.