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Screen M1M2 - Schedules M-1 and M-2 (1065)
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Overview
Use this screen to enter information to prepare Schedules K-1, M-1, and M-2. Use the M3, M3-2, M3-3, and 8916A Screens to enter information to prepare Schedule M-3 and Form 8916-A.
When the Schedule B, question 4 answer is
Yes
, Form 1065, Total assets or Schedules L, M-1, M-2, and K-1, Partner's capital account analysis won't calculate. If you want to force them to calculate and/or print, go to the OthInfo
screen in the General folder. Enter code 2
in Meet all requirements for Question 4? (Force)
to force the answer to No on Schedule B. If you don't want to force the answer, but still print the schedules, enter a code in Print schedules when not required
instead.Schedule M-1 Reconciliation of Income (Loss) per Books
The application automatically transfers certain information to Schedule M-1 prior to data entry on this screen.
General information
- Differences between book and tax expenses for:
- depreciation
- amortization
- start-up expenses and organization costs
- Differences between book and tax Form 4797 gain (loss)
- The nondeductible portion of rental expenses due to personal use
- Pensions and IRAs considered guaranteed payments to partners
- Tax-exempt interest
Specific information
Figure | Input screen location (if applicable) | Form location (if applicable) |
|---|---|---|
The nondeductible portion of meal expenses | 4835-2, F-2, Inc, and Rent | N/A |
Guaranteed payments | 4835-2, F-2, Inc, K-2, OGWell, and Rent | N/A |
The nondeductible portion of conservation expenses | 4835-2 and F-2 | N/A |
Credit adjustment not on books | N/A | 5884, 6765, 8820, 8826, 8846, 8881, 8882, 8932, 8941, and 8994 |
Net income per books - Amount from Accounting Product
UltraTax CS retrieves net income per books for this field from any general ledger package that is bridged, imported, or that interfaces with UltraTax CS. This amount is not used in the return and is listed for informational purposes only. To use this amount on Schedule M-1, enter the amount displayed here in the
Net income per books - Force
field.Net income per books - Force
Net income per books is calculated for each partner based on the partner’s share of all distributable items computed in the system. Use this field to override the system’s automatic calculations.
The behavior of Schedule M-1 differs depending on whether you enter data in this field.
- If you enter data in this field, UltraTax CS uses this number on Schedule M-1, line 1 then adds and deducts the adjustments to arrive at line 9, Income (loss).
- If you leave this field blank, UltraTax CS begins with Schedule M-1, line 9, Income (loss) then adds and deducts the adjustment items backward to arrive at line 1, Net income (loss) per books.
Taxable income not on books
Enter income included on Schedule K and not recorded on books this year. UltraTax CS uses this amount on Schedule M-1, line 2.
Book expenses not deducted on tax return
Enter expenses recorded on books this year not in included on Schedule K. UltraTax CS uses this amount on Schedule M-1, line 4.
note
Amounts in this statement are assumed to be temporary and thus are not included on Schedule M-2. To include the amount on Schedule M-2, choose
P - Permanent
from the
Tax Capital
dropdown.
Nondeductible entertainment
Enter entertainment expenses included on the books. UltraTax CS includes this amount on Schedule M-1, line 4b.
Nondeductible expenses subject to 2%
Enter expenses included on the books that would have been subject to the 2% floor under pre-TCJA tax law. UltraTax CS includes this amount on Schedule M-1, line 4.
note
Amounts in this statement are assumed to be temporary and thus are not included on Schedule M-2. To include the amount on Schedule M-2, choose
P - Permanent
from the
Tax Capital
dropdown.
Tax credit adjustment not on books (Force)
UltraTax CS automatically calculates the tax credit adjustment not on books, which represents the difference between tax and book income when tax credits affect income on 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. 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-1, line 4 and Schedule K, line 18c, Nondeductible expenses.
note
To override the calculated amount of tax credit adjustment on Schedule M-3, Other expense/deduction items with differences, use the
Tax credit adjustment not on books (Force)
field in the M3-2 Screen.Maximum amount for Schedule M-1 rounding
If you enter an amount in the Net income per books (Force) field, UltraTax CS automatically rounds differences between Schedule M-1, Income (loss) and Form 1065, Page 5, Analysis of Income up to $10. However, UltraTax CS does not make a rounding adjustment if Schedule M-1 is out of balance by more than $10.
Enter an out-of-balance threshold, or enter 0 (zero) if you do not want to make an automatic adjustment. UltraTax CS performs an out-of-balance adjustment up to the amount you specify.
To change the default $10 out-of-balance threshold one time for all new clients, enter an amount in the
Maximum amount for Schedule M-1 rounding (M1M2 Screen)
field in the Return Presentation tab in the New Client Options dialog. To open this dialog, choose the Setup and then 1065 Partnership, and select the New Client Options button.Book information, if different than tax
These fields contain the actual book amounts (not the book-tax adjustment amount). UltraTax CS uses these fields to generate a Schedule M-1 or Schedule M-3 reconciling item for the difference between the book depreciation and the total tax depreciation.
The
Amounts from Asset Module
fields in the first column display the book amounts transferred from the asset module. To have UltraTax CS use a book amount that is different from the amounts displayed in the first column, enter an amount, including 0 (zero), in the second Force
column. If both book fields are blank or if the book amount equals the tax amount, UltraTax CS does not generate a Schedule M-1 or Schedule M-3 adjustment.Start-up or organization costs
Due to the complexities of Schedule M-3, UltraTax CS cannot automatically make an M-3 reconciling adjustment to the book-tax difference for the start-up expense and organization cost deduction. You will need to enter the book expense and temporary and permanent differences in the M3-3 Screen.
4797 gain or loss
UltraTax CS assumes the following when generating the Form 4797 gain or loss Schedule M-1 or Schedule M-3 adjustment.
- UltraTax CS separately reports the gain or loss on the disposal of section 179 assets to the partners and does not include the gain or loss on Form 1065, Schedule K. However, UltraTax CS assumes the gain or loss on disposal of section 179 assets is included in book income. Therefore, UltraTax CS generates a Schedule M-1 or Schedule M-3 reconciling amount for the entire amount of book gain or loss on the disposal of assets with a section 179 expense deduction.
- If you have a gain or loss on assets that were disposed of in a casualty or theft or were traded in a like-kind exchange, and the gain or loss is included in your book income, enter the total book gain or loss in theForcefield to prevent UltraTax CS from generating a Schedule M-1 or Schedule M-3 adjustment.
Analysis of Partners’ Schedule M-2 Tax Capital Accounts
Current instructions indicate that capital reported on Schedule K-1 should match the capital reported Schedule M-2. Use the fields in this section to enter capital information for both Schedule M-2 and Schedule K-1.
Net income per books (Force)
Enter an amount, including 0 (zero), to override the calculated amount of net income (loss) per books that appears on Schedule M-2, line 3 and Schedule K-1, Item L, Current year net income (loss).
note
The following adjustments are made for the calculation of tax based net income (loss) per books:
Figure | Input screen location (if applicable) | Form location (if applicable) |
|---|---|---|
Tax-exempt interest income | K-4 and K1-5 | N/A |
Permanent tax-exempt income | K1-5 and M1M2 or M3-2 | N/A |
Permanent nondeductible expenses | K1-5 and M1M2 or M3-2 | N/A |
Guaranteed payments other than health insurance | 4835-2, F-2, Inc, K-2, OGWell, and Rent | N/A |
The nondeductible portion of meals and entertainment expenses | 4835-2, F-2, Inc, Rent, K1-5, and M3-3 | N/A |
The nondeductible portion of conservation expenses | 4835-2 and F-2 | N/A |
Lease inclusion expenses | 4835-2, A, F-2, Inc, and Rent | N/A |
Credit adjustment not on books | N/A | 5884, 6765, 8820, 8826, 8846, 8881, 8882, 8932, 8941, and 8994 |
Section 743(b) positive and negative specially allocated depreciation adjustments | N/A | N/A |
The nondeductible portion of rental expenses due to personal use | N/A | N/A |
Distributions subject to section 737
Use the statement to enter the description, adjusted basis, fair market value, cash received, and net precontribution gain for distributions subject to IRC section 737. The adjusted basis and fair market value entered here are added to property distributions entered in the
Other property distributions
field and certain transfers of capital entered in the Transfers of Capital window in Partner Data Entry and are reported on Schedule K, line 19b; Schedule M-2, line 6b; and Schedule K-1, Partner's capital account analysis. The fair market value, cash received, and net precontribution gain from this statement are reported in a statement on Schedule K-1, box 19, code B.Other property distributions
Use the statement to enter the description, adjusted basis, and fair market value for property distributions other than distributions subject to IRC section 737. Property distributions entered here are added to distributions entered in the
Distributions subject to section 737
field and transfers of capital entered in the Transfers of Capital window in Partner Data Entry, which use the Property distributions account for the transferring amount. The total is reported on Schedule K, line 19b; Schedule M-2, line 6b; and Schedule K-1, Partner's capital account analysis.note
Use the
Partners’ capital accounts (Force)
fields on Screen L to enter a different amount for Schedule L beginning or ending partner capital.