Other Form 1120-L Schedules Affected by Schedule M-3 Requirements

Report on Schedule L and Form 1120-L, page 1, amounts for the U.S. corporation or, if applicable, the U.S. consolidated tax group.

Schedule L If a non-tax-basis income statement and related non-tax-basis balance sheet are prepared for any purpose for a period ending with or within the tax year, the Schedule L balance sheet must be prepared showing non-tax-basis amounts. See the instructions for Schedule M-3, Part I, line 1, for the discussion of non-tax-basis income statements and related non-tax-basis balance sheets prepared for any purpose and the impact on the selection of the income statement used for Schedule M-3 and the related non-tax-basis balance sheet amounts that must be used for Schedule L.

Total assets shown on Schedule L, Part II, line 2, column (b), must equal the total assets of the life insurance company (or, in the case of a U.S. consolidated tax group, the total assets of all members of the group listed on Form 851) as of the last day of the tax year, and must be the same total assets reported by the life insurance company (or by each member of the U.S. consolidated tax group) in the non-tax-basis financial statements, if any, used for Schedule M-3. If the life insurance company prepares non-tax-basis financial statements, Schedule L, Part II, line 2, column (b), must equal the sum of the non-tax-basis financial statement total assets for each corporation listed on Form 851 and included in the U.S. consolidated tax return (includible corporation) net of eliminations for intercompany transactions between includible corporations. If the life insurance company does not prepare non-tax-basis financial statements, Schedule L, Part II, line 2, column (b), must be based on the life insurance company’s books and records. The Schedule L balance sheet may show tax-basis balance sheet amounts if the life insurance company is allowed to use books and records for Schedule M-3 and the life insurance company’s books and records reflect only tax-basis amounts.

Generally, total assets at the beginning of the year (Schedule L, Part II, line 2, column (a)) must equal total assets at the close of the prior year (Schedule L, Part II, line 2, column (b)). For each Schedule L balance sheet item reported for which there is a difference between the current opening balance sheet amount and the prior closing balance sheet amount, attach a statement that reports the balance sheet item, the prior closing amount, the current opening amount, and a short explanation of the change. Reasons for those differences include mergers and acquisitions.

For purposes of measuring total assets at the end of the year, the corporation’s assets may not be netted or reduced by the corporation’s liabilities. In addition, total assets may not be reported as a negative amount. If Schedule L is prepared on a non-tax-basis method, an investment in a partnership may be shown as appropriate under the corporation’s non-tax-basis method of

accounting, including, if required by the corporation’s reporting methodology, the equity method of accounting for investments. If Schedule L is prepared on a tax basis, an investment by the corporation in a partnership must be shown as an asset and measured by the corporation’s adjusted basis in its partnership interest. Any liabilities contributing to such adjusted basis must be shown on Schedule L as corporate liabilities.

Consolidated Return (Form 1120-L, Page 1) Report on Form 1120-L, page 1, each item of income, gain, loss, expense, or deduction net of elimination entries for intercompany transactions between includible corporations. The corporation must not report as dividends on Form 1120-L, Schedule A, any amounts received from an includible corporation unless the corporation receiving the intercompany dividends is an insurance company and only to the extent that the insurance company is required to include intercompany dividends in taxable income. (See the instructions for Part I, lines 10a, 10b, 10c, and 11, for a discussion of intercompany dividends and insurance company statutory accounting.) In general, dividends received from an includible corporation must be eliminated in consolidation rather than offset by the dividends-received deduction.