Department of the Treasury
Internal Revenue Service
Schedule M-3 (Form 1120)
Net Income (Loss) Reconciliation for Corporations With Total Assets of
$10 Million or More
Section references are to the Internal Revenue Code unless otherwise noted.
statements used for Schedule M-3.
Schedule M-3. Rather, any item of
The Schedule L balance sheet may
income, gain, deduction, or credit of a
show tax-basis balance sheet
disregarded entity must be reported
Purpose of Schedule
amounts if the corporation is allowed
as an item of its owner.
to use books and records for
Schedule M-3 Part I asks certain
Schedule M-3 and the corporation's
questions about the corporation’s
only books and records reflect
Schedule M-3 Part II reconciles
for Parts I and II
financial statement net income (loss)
for the financial statement
Schedule M-2, line 2, net income
consolidation group to income (loss)
Part I. Questions
(loss) must equal the amount shown
per the income statement for the U.S.
on Schedule M-3, Part II, line 8.
consolidated tax group.
Schedule M-2 must reflect activity
Schedule M-3, Parts III and IV
only of corporations included in the
reconcile financial statement net
U.S. consolidated tax return.
and Publicly Traded
income (loss) for the U.S.
consolidated tax group (per Schedule
M-3, Part II, line 8) to taxable income
(Form 1120, Page 1)
on Form 1120, page 1, line 28.
Line 1. Indicate Source of
Form 1120, page 1 must report any
Net Income Shown on Part II,
Who Must File
item of income, gain, loss, deduction,
or credit net of elimination entries for
Any domestic corporation or U.S.
Check the financial statement type
intercompany transactions between
consolidated tax group (includible
listed on Part 1, line 1, that is the
affiliated corporations included in the