Question

Indicate for each of the following financial statement items whether it would cause no adjustment or whether its absolute value would be either added to or subtracted from net income per books when computing taxable income on the Schedule M-1:_____________
a) Municipal Bond Interest Earned.
b) Excess of Capital Losses Over Capital Gains
c) Interest Expense Associated with Purchase of Muni Bonds

Answer 1

Answer:

(A) Subtracted

(B) Added

(C) Added

Explanation:

The Schedule M 1  aim is to verify the book balance kept by the partnership firm with the taxable income. Form no 1065 is reflecting the  Schedule M 1. It declares all income, losses, deductions, expenses, etc.

While computing the taxable income, the income should be deducted whereas losses and expenses should be added.  

So according to these above explanations, the adjustments are done accordingly