Schedules L, M-1, and M-2 calculations
According to the IRS 2020 Form 1065 instructions, Schedule M-1 uses book basis. Schedules M-2 and K-1 now use tax basis.
When you use Schedule M-1 with M-2, the calculation for M-2 line 3 uses:
- Form 1065, page 6, line 1
- The manual adjustments for M-1 from the M1M2 screen in theBalance Sheet inputfolder.
The following automatic adjustments are considered permanent:
- Tax-exempt interest
- Meals and entertainment
- Lease inclusion
- Rent personal expenses
- Tax credit adjustments
- Conservation expenses
When you use Schedule M-3 with M-2, the calculation for M-2 line 3 uses:
- Form 1065, page 6, line 1.
- The Manual adjustments for M-3 from the M3-2 screen in theBalance Sheet inputfolder.
The following automatic adjustments are considered permanent:
- Tax-exempt interest
- Meals and entertainment
- Lease inclusion
- Rent personal expenses
- Tax credit adjustments
- Conservation expenses
If the calculated amount on Schedule M-2 line 3 should be different, go to the
Balance Sheet input
folder and open the M1M2
window. Then use the Net income per books (Force)
field to enter the information.
