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Instructor Blog - Credit College - Taxes

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Cash Based Income Tax Returns


  • admin

  • 9/9/2020 9:59:48 AM

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  • Credit College - Taxes
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Q: My question pertains to the CASH to Accrual Conversion worksheet.  I want to apply what I learned last week to the current live analysis that I am currently looking at.  However, the tax return is not a Partnership like in class, but instead it is an 1120 Corporate tax return.   I am wondering if the application is the same?  I noticed the Schedule K from 1120 is not the same as the 1065. Would you have a conversion worksheet that uses an 1120 Tax Return?

A: For a C Corp, all the information captured on Schedule K-1 for a partnership or S Corp is reported on Schedule 1120 - the income statement on the first page of Form 1120. For a C Corp there is no equivalent to a Schedule K. It exists but captures very different information, since all the taxable income and deductible expenses are reported on Schedule 1120.
 
For example, interest income reported at Line 5 on Schedule K is reported at Line 5 on Schedule 1120. No need for any transfer of data...and so on for every other taxable income or tax deductible expense reported on Schedule K and then on Schedule K-1 for the pass-throughs.

Schedule M-1 plays the identical role it plays for a partnership or S Corp. That means that the guidance we provide in our Schedule 1065 Conversion Worksheet for a partnership applies to a C Corp. In fact the conversion process should be much simpler, since the only adjustments to amounts reported on Schedule 1120 come from information in Schedule M-1.

Just focusing on the Conversion Worksheet for Carter Park Mill Works, every reference to Schedule K is eliminated since that information already exists on Schedule 1120. The only adjustments necessary are those indicated by Schedule M-1.

Course overview: Cash Based Income Tax Returns

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