Schedules L, M-1, and M-2 FAQ (1065)

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Printing

The printing of these schedules is controlled by the answer to Form 1065, Schedule B, question 4. UltraTax CS answers Yes to question 4 and does not complete Form 1065, Total assets or Schedules L, M-1, M-2, and K-1, Partner's capital account analysis if the following requirements are met:

  • Total receipts for the year were less than $250,000.
  • Total assets at the end of the year were less than $1 million.
  • Schedules K-1 are filed with the return and given to the partners on or before the due date (including extensions).
  • The partnership is not filing and is not required to file Schedule M-3.

Force printing status

To manually decide the printing status for these schedules:

  1. Go to the General Folder
  2. Open the OthInfo screen
  3. Select code 1 or 2 in from the Meet all requirements for Question 4? (Force) drop-down menu.
    • With code 2 for No, UltraTax CS will complete Form 1065, Total Assets and Schedules L, M-1, M-2, and K-1, Partner's Capital Account Analysis.
    • With code 1 for Yes, UltraTax CS will not complete Form 1065, Total Assets and Schedules L, M-1, M-2, and K-1, Partner's Capital Account Analysis.

      Notes

      • If you want to print the Schedule K-1, Item L and Schedule L, M-1, and M-2, enter code 1 in the Print schedules when not required field.
      • If you want to print only the Schedule K-1, Item L, enter code 2 in the Print schedules when not required field.

Calculations

Based on the 2020 Form 1065 instructions, Schedule M-1 uses book basis while Schedules M-2 and K-1 now use tax basis.

Schedule M-2 Line 3

When using Schedule M-1 with M-2, the calculation for M-2 line 3 uses the following:

  • Form 1065, page 5, line 1.
  • Automatic adjustments considered permanent:
    • Tax-exempt interest
    • Meals and entertainment
    • Lease inclusion
    • Rent personal expenses
    • Tax credit adjustments
    • Conservation expenses
  • Manual adjustments for M-1 entered on the M1M2 screen in the Balance Sheet input folder.

When using Schedule M-3 with M-2, the calculation for M-2 line 3 uses:

  • Form 1065, page 5, line 1.
  • Automatic adjustments considered permanent:
    • Tax-exempt interest
    • Meals and entertainment
    • Lease inclusion
    • Rent personal expenses
    • Tax credit adjustments
    • Conservation expenses
  • Manual adjustments for M-3 entered on the M3-2 screen in the Balance Sheet input folder.

If the calculated amount on Schedule M-2 line 3 should be different,

  1. Go to the Balance Sheet input folder.
  2. Open the M1M2 screen
  3. Scroll to the Analysis of Partners' Schedule M-2 Tax Capital Accounts section
  4. Use the Net income per books (Force) field.

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