1120-F (Schedule M Reconciliation of Income (Loss) and Analysis of Unapprop

SCHEDULES M-1 and M-2

(Form 1120-F)

Reconciliation of Income (Loss) and Analysis of
Unappropriated Retained Earnings per Books

Department of the Treasury
Internal Revenue Service
Name of corporation

Schedule M-1
1
2
3
4

 Attach

OMB No. 1545-0126

2009

to Form 1120-F.

Employer identification number

Reconciliation of Income (Loss) per Books With Income per Return
Note: Schedule M-3 may be required instead of Schedule M-1—see instructions.
7

Income recorded on books this year
not included on this return (itemize):
a Tax-exempt interest $
b Other (itemize):

Net income (loss) per books . . . . .
Federal income tax per books . . . .
Excess of capital losses over capital gains
Income subject to tax not recorded on
books this year (itemize):

8

Deductions on this return not charged
against book income this year (itemize):
a Depreciation . . $
b Charitable contributions $
c Other (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):

6

Add lines 1 through 5 .

Schedule M-2
1
2
3

4

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9
10

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Add lines 7 and 8 . . . .
Income—line 6 less line 9 .

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6

a Cash . .
b Stock . .
c Property .
Other decreases (itemize):

7
8

Add lines 5 and 6 . . . . . . .
Balance at end of year (line 4 less line 7) .

Analysis of Unappropriated Retained Earnings per Books

Balance at beginning of year
Net income (loss) per books .
Other increases (itemize):

Add lines 1, 2, and 3 .

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5

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Distributions:

Who Must File

Specific Instructions

Generally, any foreign corporation that is
required to complete Form 1120-F,
Section II must complete Schedules M-1
and M-2. However, under some
circumstances, a foreign corporation is
required to complete (or may voluntarily
complete) Schedule M-3 in lieu of
Schedule M-1.

Schedule M-1

Complete Schedule M-3 in lieu of
Schedule M-1 if total assets at the end
of the tax year that are reportable on
Schedule L are $10 million or more. A
corporation filing Form 1120-F that is not
required to file Schedule M-3 (Form
1120-F) may voluntarily file Schedule
M-3 instead of Schedule M-1. See the
Instructions for Schedule M-3 (Form
1120-F) for more information.
Note. If Schedule M-3 is completed in
lieu of Schedule M-1, the corporation is
still required to complete Schedule M-2.
Do not complete Schedules M-1, M-2,
and M-3 if total assets at the end of the
tax year (Schedule L, line 17, column (d))
are less than $25,000.

Line 1. Net income (loss) per books.
The foreign corporation must report on
line 1 of Schedule M-1 the net income
(loss) per the set or sets of books taken
into account on Schedule L.
Line 5c. Travel and entertainment
expenses. Include any of the following:
• Meal and entertainment expenses not
deductible under section 274(n).
• Expenses for the use of an
entertainment facility.
• The part of business gifts over $25.
• Expenses of an individual over $2,000
that are allocable to conventions on
cruise ships.
• Employee achievement awards over
$400.
• The cost of entertainment tickets over
face value (also subject to the 50% limit
under section 274(n)).

• The part of luxury water travel
expenses not deductible under section
274(m).
• Expenses for travel as a form of
education.
• Other nondeductible travel and
entertainment expenses.
For more information, see Pub. 542.
Line 7a. Tax-exempt interest. Report
any tax-exempt interest received or
accrued, including any exempt-interest
dividends received as a shareholder in a
mutual fund or other regulated
investment company. Also report this
same amount in item P at the top of
page 2 of Form 1120-F.

Schedule M-2
Line 1. Beginning balance of
unappropriated retained earnings.
Enter the beginning balance of
unappropriated retained earnings per the
set(s) of books taken into account on
Schedule L.

• The cost of skyboxes over the face
value of nonluxury box seat tickets.

For Privacy Act and Paperwork Reduction Act Notice,
see the Instructions for Form 1120-F.

Cat. No. 49678K

Schedules M-1 and M-2 (Form 1120-F) 2009