1120-F Schedule M- Net income (Loss) Reconciliation for Foreign Corporation

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SCHEDULE M-3
(Form 1120-F)
Department of the Treasury
Internal Revenue Service
Name of corporation

Net Income (Loss) Reconciliation for Foreign
Corporations With Reportable Assets of $10 Million or More
▶

OMB No. 1545-0123

2018

▶ Attach to Form 1120-F.
Go to www.irs.gov/Form1120F for instructions and the latest information.

Employer identification number

DRAFT AS OF
September 4, 2018
DO NOT FILE
Has the corporation reported taxable income on Form 1120-F, page 4, using a treaty provision to attribute
business profits to a U.S. permanent establishment under rules other than section 864(c)? . . . . . .

Yes

No

Did the corporation prepare a non-consolidated, worldwide, certified audited income statement for the
period (see instructions)?
. . . . . . . . . . . . . . . . . . . . . . . . . . .

Yes

No

C

Did the corporation prepare a non-consolidated, worldwide income statement for the period (see instructions)?

Yes

No

D

Did the corporation prepare certified audited income statement(s) for the set(s) of books reported on
Form 1120-F, Schedule L? . . . . . . . . . . . . . . . . . . . . . . . . . . .

Yes

No

A

B

Part I
1

Financial Information and Net Income (Loss) Reconciliation (see instructions)

Is the corporation a foreign bank as defined in Regulations section 1.882-5(c)(4)?
Yes. Complete the remainder of Part I as follows:
If D is “Yes,” use the income statement described in D to complete lines 2 through 5 and 7 through 11.
If D is “No,” use the income statement(s) for the set(s) of books reported on Form 1120-F, Schedule L
to complete lines 2 through 5 and 7 through 11.

No. Complete the remainder of Part I as follows:
If B is “Yes,” use the income statement described in B to complete lines 2 through 11.
If B is “No” and C is “Yes,” use the income statement described in C to complete lines 2 through 11.
If B and C are “No” and D is “Yes,” use the income statement described in D to complete lines 2 through 11.
If B, C, and D are “No,” use the income statement described in the instructions to complete lines 2 through 11.
2a Enter the income statement period: Beginning
Ending
b Has the corporation’s income statement been restated for the income statement period entered on line 2a?
Yes. Attach an explanation and the amount of each item restated.
No.
c Has the corporation’s income statement been restated for any of the 5 income statement periods immediately
preceding the period on line 2a?

3

Yes. Attach an explanation and the amount of each item restated.
No.
Is any of the corporation’s stock publicly traded on any exchange, U.S. or foreign?
Yes. List exchange(s) and symbol ▶
No.

4

Non-consolidated foreign corporation net income (loss) in U.S. dollars from the income statement
source identified in line 1 . . . . . . . . . . . . . . . . . . . . . . . . . .

5a
b
c
d
6
7a
b
8
9
10
11

Net income from includible disregarded foreign entities not included on line 4 (attach statement) . .
Net loss from includible disregarded foreign entities not included on line 4 (attach statement) . . .
Net income from includible disregarded U.S. entities not included on line 4 (attach statement) . . .
Net loss from includible disregarded U.S. entities not included on line 4 (attach statement) . . . .
Net income (loss) from foreign locations not included on line 4 (attach statement) . . . . . . .
Net income of non-includible entities (attach statement) . . . . . . . . . . . . . . .
Net loss of non-includible entities (attach statement)
. . . . . . . . . . . . . . . .
Adjustments to intercompany transactions (attach statement)
. . . . . . . . . . . . .
Adjustments to reconcile income statement period to tax year (attach statement) . . . . . . .
Other adjustments to reconcile to amount on line 11 (attach statement) . . . . . . . . . .
Adjusted financial net income (loss) of non-consolidated foreign corporation. Combine lines 4
through 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4
5a
5b (
5c
5d (
6
7a (
7b
8
9
10

)
)
)

11

Note. Part I, line 11, must equal Part II, line 28, column (a) or Schedule M-1, line 1 (see instructions).
For Paperwork Reduction Act Notice, see the Instructions
for Form 1120-F.

Cat. No. 39667H

Schedule M-3 (Form 1120-F) 2018

Page 2

Schedule M-3 (Form 1120-F) 2018

Employer identification number

Name of corporation

Part II

Reconciliation of Net Income (Loss) per Income Statement of Non-Consolidated Foreign Corporations With
Taxable Income per Return (see instructions)
(a)
Income (Loss) per
Income Statement

(b)
Temporary
Differences

(c)
Permanent
Differences

(d)
Other Permanent
Differences
for Allocations to
Non-ECI and ECI

(e)
Income (Loss)
per Tax Return

DRAFT AS OF
September 4, 2018
DO NOT FILE
Income (Loss) Items

1
2
3a
b
c

Gross receipts . . . . . . . .
Cost of goods sold (attach statement) .
Dividends from foreign entities . . .
Dividends from U.S. entities . . . .
Substitute dividend payments received

4a

Interest income excluding interest
equivalents . . . . . . . . .

b
c

Substitute interest payments received
Interest equivalents not included on line 4b
Gross rental income . . . . . .
Gross royalty income . . . . . .
Fee and commission income
. . .

5
6
7
8

Income (loss) from equity method
corporations . . . . . . . .

9

Net income (loss) from U.S. partnerships

10

Net income (loss) from certain foreign
partnerships (see instructions) . . .

11

Net income (loss) from other passthrough entities (attach statement) . .

12

Items relating to reportable transactions
(attach statement) . . . . . . .

13

Hedging transactions .

14a

Mark-to-market income (loss) under
section 475(a) . . . . . . . .

b

Mark-to-market income (loss) subject to
section 475(d)(3)(B) . . . . . .

c

Mark-to-market income (loss) under
section 475(e) . . . . . . . .

d

Mark-to-market income (loss) under
section 475(f) . . . . . . . .

.

.

.

.

.

15

Gain (loss) from certain section 988
transactions . . . . . . . .

16a

Interest income from global securities
dealing . . . . . . . . . .

b

Dividends from global securities dealing

c

Gains (losses) and other fixed and
determinable, annual, or periodic
income from global securities dealing
not included on lines 16a and 16b . .

17

Sales versus lease (for sellers and/or
lessors) . . . . . . . . . .

18
19
20

Section 481(a) adjustments . . . .
Unearned/deferred revenue . . . .
Original issue discount, imputed
interest, and phantom income . . .
Income statement gain/loss on sale,
exchange, abandonment, worthlessness, or
other disposition of assets other than
inventory and pass-through entities . .

21a

b

Gross capital gains from Schedule D,
excluding amounts from pass-through
entities . . . . . . . . . .
Schedule M-3 (Form 1120-F) 2018

Page 3

Schedule M-3 (Form 1120-F) 2018

Employer identification number

Name of corporation

Part II

Reconciliation of Net Income (Loss) per Income Statement of Non-Consolidated Foreign Corporations
With Taxable Income per Return (see instructions) (continued from page 2)
(a)
Income (Loss) per
Income Statement

(b)
Temporary
Differences

(c)
Permanent
Differences

(d)
Other Permanent
Differences
for Allocations to
Non-ECI and ECI

(e)
Income (Loss)
per Tax Return

DRAFT AS OF
September 4, 2018
DO NOT FILE
Income (Loss) Items

21c

Gross capital losses from Schedule D,
excluding amounts from pass-through
entities, abandonment losses, and
worthless stock losses . . . . .

d

Net gain/loss reported on Form 4797,
line 17, excluding amounts from
pass-through entities, abandonment
losses, and worthless stock losses . .

e Abandonment losses . . . . . .
f Worthless stock losses (attach statement)
g Other gain/loss on disposition of assets
other than inventory .

.

.

.

.

.

22

Capital loss limitation and carryforward
used
. . . . . . . . . .

23

Gross effectively connected income of
foreign banks from books that do not
give
rise
to
U.S.
booked
liabilities
. . . . . . . . .

24

Other income (loss) items
differences (attach statement) .

25

Total income (loss) items. Combine
lines 1 through 24 . . . . . . .

26

Total expense/deduction items (from
Part III, line 33)
. . . . . . .

27
28

Other items with no differences .

with
. .

.

.

Reconciliation totals. Combine lines 25
through 27 . . . . . . . . .
Note. Line 28, column (a), must equal Part I, line 11, and column (e) must equal Form 1120-F, page 4, line 29.

Part III

Reconciliation of Net Income (Loss) per Income Statement of Non-Consolidated Foreign Corporations
With Taxable Income per Return (see instructions)
(a)
Expense per
Income Statement

Expense/Deduction Items
1
2
3

U.S. current income tax expense .
U.S. deferred income tax expense .

4

Non-U.S.
expense

5
6
7
8
9
10
11
12

(b)
Temporary
Differences

(c)
Permanent
Differences

(d)
Other Permanent
Differences
for Allocations to
Non-ECI and ECI

(e)
Deduction per
Tax Return

.
.

Non-U.S. current income tax expense
(other than foreign withholding taxes) .
.

deferred
. . .

income
. . .

Non-U.S. withholding taxes .

.

.

tax
.

.

.

Compensation with section 162(m)
limitation . . . . . . . . .
Salaries and other base compensation
Stock option expense
. . . . .
Other equity-based compensation . .
Meals and entertainment . . . . .
Fines and penalties . . . . . .
Judgments, damages, awards, and
similar costs . . . . . . . .
Schedule M-3 (Form 1120-F) 2018

Page 4

Schedule M-3 (Form 1120-F) 2018

Employer identification number

Name of corporation

Part III

Reconciliation of Net Income (Loss) per Income Statement of Non-Consolidated Foreign
Corporations With Taxable Income per Return (see instructions) (continued from page 3)
(a)
Expense per
Income Statement

(b)
Temporary
Differences

(d)
Other Permanent
Differences
for Allocations to
Non-ECI and ECI

(c)
Permanent
Differences

(e)
Deduction per
Tax Return

DRAFT AS OF
September 4, 2018
DO NOT FILE
Expense/Deduction Items

13
14
15
16

Pension and profit-sharing .
Other post-retirement benefits
Deferred compensation . .
Charitable contributions . .

17

Section 162(r)–FDIC premiums paid by
certain large financial institutions (see
instructions) . . . . . . . .

18

Current
year
acquisition
or
reorganization
investment
banking
fees, legal and accounting fees . . .

19

Current year acquisition/reorganization
other costs . . . . . . . . .

20
21

Amortization/impairment of goodwill .
Amortization
of
acquisition,
reorganization, and start-up costs . .

22

Other amortization or
write-offs . . . . .

impairment
. . . .

23
24
25

Depreciation . . .
Bad debt expense
.
Purchase versus lease
and/or lessees)
. .

. . . .
. . . .
purchasers
. . . .

26a

Interest expense per books .

.
.
(for
.

.
.
.
.

.

.
.
.
.

.

.
.
.
.

.

b Interest expense under Regulations
section 1.882-5 (from Schedule I (Form
1120-F), line 23) . . . . . . .

c

Regulations section
amount
subject
disallowance (from
1120-F), line 24d) .

1.882-5 allocation
to
deferral
or
Schedule I (Form
. . . . . .

(

)

d Substitute interest payments . . .
e Interest equivalents (for example,
guarantee fees) not included on line 26d

27
28
29
30

Substitute dividend payments
Fee and commission expense
Rental expense . . . .
Royalty expense . . . .

31

Expenses allocable to effectively
connected income under Regulations
section 1.861-8 from home office or
other books that do not give rise to U.S.
booked liabilities (from Schedule H
(Form 1120-F), line 20) . . . . .

32

Other expense/deduction items with
differences (attach statement) . . .

33

Total
expense/deduction
items.
Combine lines 1 through 32. Enter here
and on Part II, line 26 . . . . . .

.
.
.
.

.
.
.
.

.
.
.
.

Schedule M-3 (Form 1120-F) 2018