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

question 19

Multiple Choice

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 an addition on Schedule M-1?

• A) Tax depreciation in excess of book depreciation.
• B) Proceeds of life insurance paid on death of key employee.
• C) Excess of capital losses over capital gains.
• D) Tax-exempt interest.
• E) None of these.

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Definitions:

Business Risk

The exposure to factors that may cause a business to experience lower profits or financial loss.

Financial Risk

The possibility of losing money on an investment or business venture due to various factors including market fluctuations, economic conditions, or management decisions.

Liquidating Corporation

A process wherein a company sells its assets, pays off creditors, and distributes any remaining assets to shareholders, effectively dissolving the company.

Bankruptcy and Insolvency Act

Legislation that provides the legal framework for the resolution of financial distress and insolvency situations, including the reorganization or liquidation of debtor assets.