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

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

SCHEDULES M-1 and M-2

(Form 1120-F)

Department of the Treasury
Internal Revenue Service
Name of corporation

Schedule M-1
1
2
3
4

▶

OMB No. 1545-0123

2016

Information about Schedules M-1 and M-2 (Form 1120-F) and its instructions is at www.irs.gov/form1120f.
▶ Attach to Form 1120-F.

Employer identification number

Reconciliation of Income (Loss) per Books With Income per Return
Note. The corporation may be required to file Schedule M-3 (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

.

.

.

.

.

.

9
10

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

.
.

.
.

.
.

.
.
.

.
.
.

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 .

.

.

.
.

.

Who Must File
Generally, any foreign corporation that is
required to complete Form 1120-F,
Section II must complete Schedules M-1
and M-2 (Form 1120-F). However, the
following rules apply.
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.
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 may
voluntarily file Schedule M-3 instead of
Schedule M-1. See the Instructions for
Schedule M-3 (Form 1120-F) for more
information.
Foreign corporations that (a) are
required to file a Schedule M-3 (Form
1120-F) and have less than $50 million in
total assets at the end of the tax year or
(b) are not required to file a Schedule
M-3 (Form 1120-F) and voluntarily file a
Schedule M-3 (Form 1120-F) must either
(1) complete Schedule M-3 (Form 1120-F)
entirely or (2) complete Schedule M-3
(Form 1120-F) through Part I and

.
.

.

.
.

.

.
.

.

5

Distributions:

complete Schedule M-1 instead of
completing Parts II and III of Schedule
M-3 (Form 1120-F). If the foreign
corporation chooses (2), then Schedule
M-1, line 1 must equal Schedule M-3
(Form 1120-F), Part I, line 11. 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.

Specific Instructions
Schedule M-1
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.

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

Cat. No. 49678K

• Employee achievement awards over $400.
• The cost of entertainment tickets over
face value (also subject to the 50% limit
under section 274(n)).
• The cost of skyboxes over the face
value of nonluxury box seat tickets.
• 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.
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.
Note. For additional information for
Schedule M-2 reporting, see the
Instructions for Schedule M-3 (Form
1120-F).
Schedules M-1 and M-2 (Form 1120-F) 2016