I'm stuck on part 2 for the Rocky Mountain Equipment Corporation. I'm stuck on the M-1 schedule....well really I'm stuck on the whole question. I have some answers input already.

Critical Thinking Option 2 Breonna Cox ACT415 - Business Taxation Colorado State University-Global Campus Dr. Wendy Achilles 6/16/2020 Part 1: Tax Impacts to Corporation and Shareholder of a IRC Sec. 351 Contribution Taxpayer A transfers property with an adjusted basis of $10,000 and a fair market value of $50,000 to a controlled corporation in exchange for stock worth $30,000, cash of $10,000, and other property with a fair market value of $10,000. What, if any gain will be recognized? Stock Cash (boot) Adjusted Basis Amount realized (fair market) Less: adjusted basis of property transferred Gain Realized Gain Recognized (lesser of boot or gain realized) $ $ $ $ $ $ $ 30,000 10,000 10,000 50,000 (10,000) 40,000 20,000 Cornell Law School (n.d.) states that 26 U.S. Cod The cash totaled $10,000 and the fair market is Reference: Cornell Law School (n.d.). 26 U.S. Code 351. Transfer to corporation controlled by transferor. Cornell Law School. Retrieved f to a controlled arket value of n.d.) states that 26 U.S. Code 351(b) is the receipt of property. Calculated as (A) the amount of money received, plus (B) the fair market va ,000 and the fair market is $50,000, totaling $60,000. The gain realized is $40,000. The $60,000 minus the $40,000 produces $20,000 gain nell Law School. Retrieved from https://www.law.cornell.edu/uscode/text/26/351 ved, plus (B) the fair market value of sich other property received. 40,000 produces $20,000 gain recognized under 26 U.S. Code 351(b. Part 2: Schedule MA (CT1) and MC (CT2) for Rocky Mountain Equipment Corporation Form 1120-F The Rocky Mountain Equipment Corporation, a Colorado Corporation, was formed by two Colorado State University business school graduates. The Rocky Mountain Equipment Corporation incorporated on October 20, 1974. The main line of business is selling recreational equipment to outdoor enthusiasts. Starting in their parents' garage, they have grown the corporation to a multimillion dollar business. To comply with accounting requirements, the company uses an accrual method of accounting, Its accumulated earnings and profits as of December 31, 2016 were $1,200. It made cash distributions during its 2016 calendar tax year of $140,089. This consisted of $85,089 to preferred shareholders and $55,000 to common shareholders. The entire distribution to preferred shareholders is a taxable dividend. The $27,500 distribution on March 15, 2016, to common shareholders is a taxable dividend to extent of $27,318 (99.33%), and the $27,500 distribution on September 15, 2016, to common shareholders is a taxable dividend to the extent of $26,118 (94.97%). The following profit and loss account appeared in the books of the Rocky Mountain Equipment Corporation for calendar year 2016. It is required to file Form 1120 and completes Form 1120-F (M-1 and M-2). Account Gross sales Sales returns and Allowances Cost of goods sold Interest income from: Banks Tax-exempt state bonds Proceeds from life insurance (death of corporate officer) Bad debt recoveries (no tax deduction claimed) Insurance premiums on lives of corporate officers Compensation of officers Salaries and wages Repairs Taxes Contributions: Deductible Other Interest paid (loan to purchase tax-exempt bonds) Depreciation Loss on securities Net income per books after federeal income tax Federal income tax accrued for 2016 Total Debit Credit $ 1,840,000 $ 20,000 $ 1,520,000 $ 10,000 $ 5,000 $ $ $ $ $ $ $ $ 15,000 6,000 3,500 9,500 40,000 28,000 800 10,000 $ 23,000 $ 500 $ 23,500 $ 850 $ 5,200 $ 3,600 $ 140,825 $ 62,225 $ 1,864,500 $ 1,864,500 The corporation analyzed the retained earnings and the following items appeared in this account on its books. Item Debit Credit Balance, January 1 Net profit (before federal income tax) Reserve for contingencies Income tax accrued for the year Dividends paid during the year Refund of 1995 income tax Balance, December 31 Total $ $ 225,000 203,050 $ $ $ 10,000 62,225 140,089 $ 233,736 446,050 $ 18,000 $ $ 446,050 The following items appear on page 1 of Form 1120. Gross sales ($1,840,000 less returns and allowances of $20,000) Cost of goods sold Gross profit from sales Interest income Total Income Deductions: Compensation of officers Salaries and wages Repairs Taxes Contributions (maximum allowable) Depreciation Total Deductions Taxable Income $ 1,820,000 $ 1,520,000 $ 300,000 $ 10,000 $ 310,000 $ $ $ $ $ $ 40,000 28,000 800 10,000 22,500 6,200 $ $ 107,500 202,500 1) Please prepare Schedule M-1 for Rocky Mountain Equipment Corporation using the financial information and the Form 1120 line items provided above. 2) Please prepare Schedule M-2 for Rocky Mountain Equipment Corporation using the retained earnings information provided. To accurately calculate and support the ending balance, please complete a Retained Earnings Reconciliation Table. calendar tax olders. The 15, 2016, to SCHEDULES M-1 AND M-2 (FORM 1120-F) Department of the Treasury Internal Revenue Service Reconcilitaion of Income (Loss) Unappropriated Retained Earn Name of corporation Rocky Mountain Equipment Corporation Reconciliation of Income (Loss) per Books With Income per Return Schedule M-1 Note: The corporation may be required to file Schedule M-3 (see instructions). 1 Net Income (loss) per books $ 140,825 2 Federal Income tax per books $ 62,225 3 Excess of capital losses over capital gains $ 3,600 4 Income subject to tax not recorded on books this year (itemize): 5 Expenses recorded on books this year not deducted on this return (itemize): a) Depreciation $ b) Charitable contributions $ c) Travel and entertainment $ d) Other (itemize): Interest for tax free bonds 6 Add Lines 1 through 5 Schedule M-2 $ 206,650 Analysis of Unappropriated Retained Earnings per Books 1 Balance at beginning of year 2 Net income (loss) per books 3 Other increases (itemize): Tax refund from 1995 4 Add lines 1, 2, and 3 $ $ 225,000 140,825 $ $ 18,000 383,825 Retained Earnings Reconciliation Table Opening Accumulated Earnings and Profits Add taxable income as per books Less: Bad debt recovered in previous year Current Year Profits Profit Distribution Preferred Dividend from current year Common Stock Dividends 99.33% of $27,500 94.97% of $27,500 Current year balance profits Dividend charged to accumulated profits Dividend charged to capital Accumulated Profit Balance $ $ $ $ 1,200 202,500 (3,500) 200,200 $ (85,089) $ $ $ (27,318) (26,118) - OMB No. 1545-0123 ome (Loss) and Analysis of tained Earnings per Books 2019 Employer Identifitcation number XX-XXXXXXX me per Return e M-3 (see instructions). 7 Income recorded on books this year not included on this return (itemize): a) Tax-exempt interest $ b) Other (itemize): $ 5,000 $ 5,000 $ $ $ 5,000 (201,650) $ 140,089 $ $ $ 10,000 150,089 233,736 8 Deductions on this return not charged against book income this year (itemize): a) Depreciation $ b) Charitable contributions $ c) Other (itemize): 9 Add lines 7 and 8 10 Income - line 6 less line 9 oks 5 Distributions a Cash b Stock c Property 6 Other decreases (itemize): Reserve for contingences 7 Add lines 5 and 6 8 Balance at end of year (line 4 less line 7)