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Reconciliation Statement for Schedule L and Schedule M-2

Is there a way to add a reconciliation statement in situations where the Schedule M-2 is on tax basis and Schedule L is on GAAP basis (or other basis)?

I would like to put a reconciliation statement for ending capital on Sch. L to ending tax capital on M-2

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2 Replies 2
Level 15

We do that in Excel and keep in our workpaper file.


ex-AllStar
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Added a few edits:

Thank you. 

I am a bit confused and would greatly appreciate clarification. A bit embarrassed to be asking this so please bear with me.

For an S-Corporation that uses SL depreciation for book purposes and MACRS for tax purposes, is the following correct?

  • Schedule L will be per books using book depreciation instead of tax depreciation
  • Schedule M-1 will show the book-to-tax difference for depreciation on line 6a (for years when MACRS > SL)
  • Schedule M-2 won't match RE on Schedule L and the difference will be any non-deductible expenses, such as 50% of meals.
  • Shareholder Basis Calculation will match Schedule M-2

I know there's a lot going on in my question but I am just a bit confused about the interplay because it seems too many things aren't matching when there are two different depreciation methods (book and tax)

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