When reconciling from book income to taxable income on Schedule M-1,which of the following statements is correct?

Question

Quizplus · Accepted Answer

Federal income tax expense is a book expense that is not deductible for tax purposes. Therefore, when reconciling book income to taxable income, the federal income tax expense recorded in the financial statements is added back to book income as a positive adjustment on Schedule M-1. This is because for tax purposes, federal income taxes are not deductible, making this adjustment necessary to reconcile the book income to the taxable income.

When Reconciling from Book Income to Taxable Income on Schedule