Question

Show All Work 1. Shark Inc, a calendar year C-Corporation, and acrual method taxpayer, provides the following information to you and asks you to prepare a Schedule M i Complete the assignment using the actuaSchedule Ml iom, mo c corporation). You can obtain this schedule at www.irs, gov or in your book, Appendix 8 Form 1120 (45 points) Net Income per Book Tax Exempt interest Income: Federal Income Tax Paid: Life Insurance Proceeds: Capital loss MACRS Tax Depreciation Book Depreciation Total business meals expense 5333,000 $450 $60,000 $40,000 (received upon death of key employee-the President) $2,000 (there were no capital gains during the year) $175,000-depreciation taken on the tax return $25,000-depreciation taken for book (financial statement) $5,000

Answer 1

Schedule M1 explains the difference between the books handed to the accountant and tax return filed with the IRS.

Schedule M1 for Shark Inc.
Reconciliation of income (loss) per books with Income per Return
1	Net income (loss) per books	333000	7	Income recorded on books this year not included on this return
2	Federal income tax per books	60000	a	Tax exempt interest	450
3	Excess of capital losses on capital gains	2000	b	Key employee life insurance proceeds	40000
4	Income subject to tax not recorded on books this year		8
5	Expenses recorded on the books this year not deducted on this return		a	Depreciation on this return not charged against book income this year (tax depreciation)	175000
a	Depreciation (Book depreciation that exceeds the amount allowed for tax)	25000	b	Charitable contribution
b	Charitable contribution		c	Others
c	travel and entertainment
d	Total business meals expenses (50% not deductible on tax return)	2500	9	Add lines 7 and 8	215450
6	Add line 1 through 5	422500	10	Income - line 6 less line 9	207050