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

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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

2018

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

Employer identification number

Name of corporation

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

DRAFT AS OF
August 22, 2018
DO NOT FILE

Schedule M-1
1
2
3
4

OMB No. 1545-0123

7

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):

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

8

5

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

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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.

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9
10

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

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.
.

.
.

.
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.
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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 .

.

.

.
.

.

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
complete Schedule M-1 instead of

.
.

.

.
.

.

.
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.

5

Distributions:

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.
• Entertainment expenses not deductible
under section 274(a).
• Meal 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 of nontangible property or of tangible property
if the value is over $400 ($1,600 if part of
a qualified plan).
• 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) 2018