Corporate M-1 Reconciling Items Flashcards
STATE INCOME TAX provided and paid
F. Not on M-1
Expense on books
Deduction on the return
Municipal bond interest received
Income on books, not on tax return.
Subtract from book income.
Provision for Federal Income Tax.
Expense on books, not deductible on tax return.
Add back to book income to arrive at taxable income.
Life insurance on key officers
beneficiary: corporation
Expense on books, not on tax return. (because proceeds won’t be taxed)
Add back to book income to arrive at taxable income.
Life insurance paid by corporation for employee, employee’s family is beneficiary
Expense on books, expense on return.
Not an M-1 adjustment.
Corporate officer dies, corporation receives proceeds.
Income on books, not on tax return.
Subtract from book net income to arrive at taxable net income.
Interest received on U.S. savings bonds.
Income on both book and tax.
No M-1 reconciliation.
Rents received in advance.
Not income on books, income on tax return.
Add to book income to arrive at taxable income.
Costs of entertaining clients
Expense on books, no longer deductible on return.
Add back to book income to arrive at taxable income.
Section 179 deduction
Deductible on return, not allowed on books.
Subtract from book income to arrive at taxable net income.
Costs of organizing a newly formed corporation.
Expensed on books, partially deductible on tax return.
Add back the difference between book and tax expenses.
Excess capital losses over capital gains.
Expense on books, not deductible on tax return in current year.
Add back to book income. Carry back 3 years, carry forward 5 for tax purposes.
Direct bad-debt write-offs
Not expense on books (because already estimated in year of sale), deductible on return.
Subtract from book net income.
Actual warranty costs incurred
Not expensed on books in current year (estimated previously), deductible on tax return.
Subtract from book net income.
Accrued pension liability
Accrued pension liability is an estimate of an expense in the current year.
Expense on books, not deductible on return.
Add back to book income to arrive at taxable net income.
Penalties and fines
Book expenses, not deductible on return.
Add back to book net income to arrive at taxable net income.
Interest paid on loan to buy munis.
Expense on books, not deductible on return (because munis are tax-free income)
Interest received on corporate bonds.
Income on books, income on tax return.
No M-1 adjustment.
Cash dividends paid
Not an expense on books, not deductible on return.
No M-1 adjustment.
Cash dividends received from a less than 20% owned corporation.
Income on books, partial income on tax return (50% deduction).
M-1 adjustment for the difference.
Interest paid on loan to carry corporate bonds
Expense on books, deduct on return.
No M-1 adjustment.
Corporation pays a 30% stock dividend.
No expense on books, not deductible on return.
No M-1 adjustment.
Stock dividends received from a 10% owned corporation.
No income on books, no income for tax.
No M-1.
Gain on sale of treasury stock.
No income on books, no income for tax return.
No M-1.
Loss on sale of treasury stock
No expense, no deduction on return.
No M-1.
