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Screen M3-2 - Schedule M-3 - Income (Loss) Items (1065)

Income (Loss) Items

Use this section to enter income (loss) items from the partnership's income statement and the temporary and permanent difference for each item.
The application automatically transfers book and tax amounts and calculates the necessary temporary or permanent difference for the following items on Schedule M-3, Part II.
  • Income (loss) from U.S. partnerships
  • Income (loss) from foreign partnerships
  • Income (loss) from other passthrough entities
  • Income statement gain (loss) on sale or disposition of assets other than inventory and passthrough entities
  • Gross capital gains from Schedule D, excluding amounts from passthrough entities
  • Gross capital losses from Schedule D, excluding amounts from passthrough entities
  • Net gain (loss) reported on Form 4797, line 17
  • Other gain (loss) on disposition of assets other than inventory
Report in column (a) the amount of net income (loss) included on Schedule M-3, Page 1, line 11 for each item on Schedule M-3, Part II. Enter these amounts in the Income (Loss) per Income Statement column. For any item of income or loss where there is a difference between the income statement and the tax return amount, enter the temporary portion in the Temporary Difference column and the permanent portion in the Permanent Difference column. The application completes column (d) based on your entry in these fields.
Fields with an asterisk before the description default to application-calculated amounts based on current return information. To override the calculated amount, enter an amount, including 0 (zero), in the appropriate field.
The application automatically transfers book and tax amounts and calculates the necessary temporary and permanent differences for each passthrough activity based on data entry in the K1, K1-2, K1-5, K1-6, and K1Frgn Screens. Use the statement to enter the description, income (loss) per income statement, temporary difference, permanent difference, name, EIN, and end-of-year profit and loss percentages for interest in a passthrough activity where the partnership did not receive a Schedule K-1. The application adds the items entered in the statement to the calculated items in the printed statement.
If Forms 8886 are completed for reportable transactions, the application sequentially numbers the forms (Form 8886, line A). Enter the number of the reportable transaction in the Form 8886 Number column of the statement, and enter the related income (loss) amounts as required.
If you leave this field blank and enter
X
 in the
Calculate adjustment to balance Schedule M-3
 field in the M3 Screen, the application calculates the difference between the Net income (loss) on Form 1065, Page 5, Analysis of Income and Schedule M-3, Part II, line 26(d) and enters the amount on Schedule M-3, Part II, line 25, columns (a) and (d).
Enter an amount, including 0 (zero), in this field to use a different amount for the income (loss) per income statement for Schedule M-3, Part II, line 25(a). The application completes column (d) based on your entry in this field.

Book-Tax Differences

The application cannot automatically transfer the amounts entered for Schedule M-3 to Schedule K, Other tax-exempt income. Use the statement to enter the amount of other tax-exempt income to be included in Schedule K, Other tax-exempt income.
The application cannot automatically transfer the amounts entered for Schedule M-3 to Schedule K, Nondeductible expenses. Use the statement to enter the amount of nondeductible expenses to be included in Schedule K, Nondeductible expenses.
The application automatically calculates the tax credit adjustment not on books, which represents the difference between tax and book income when tax credits affect income of the return. The credits from Forms 5884, 6765, 8820, 8826, 8846, 8881, 8882, 8932, 8941, and 8994 reduce salaries and wages / labor hired, taxes and licenses, employee benefit programs, and other deductions/expenses of the associating activity. These adjustments generally are not made when computing book income. Enter an amount, including 0 (zero), to override the calculated amount of tax credit adjustment that appears on Schedule M-3 and Schedule K, Nondeductible expenses.
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