Schedule M-1 of Form 1120 is used to reconcile financial net income with taxable income reported on the corporation's income tax return as follows: net income per books + additions - subtractions = taxable income.Which of the following items is a subtraction on Schedule M-1.
A)Book depreciation in excess of allowable tax depreciation.
B)Federal income tax per books.
C)Premiums paid on life insurance policy on key employee.
D)Tax-exempt interest.
E)None of the above.

Question

Quizplus · Accepted Answer

Tax-exempt interest is a subtraction on Schedule M-1 because it is included in book income but not taxable, so it needs to be subtracted to reconcile to taxable income.

Schedule M-1 of Form 1120 Is Used to Reconcile Financial