Other Issues Affecting Schedule M-3 Filing Requirements

If a corporation was required to file Schedule M-3 for the preceding tax year, but reports on Form 1120-S, Schedule L, total assets at the end of the current tax year of less than $10 million, the corporation isn't required to file Schedule M-3 for the current tax year.

For purposes of determining whether the corporation has total assets at the end of the current tax year of $10 million or more, the corporation's total assets must be determined on an overall accrual method of accounting unless both of the following apply: (a) the tax return of the corporation is prepared using an overall cash method of accounting, and (b) no includible entity in the U.S. tax return prepares or is included in financial statements prepared on an accrual basis.

See the instructions for Part I,

TIP line 1, for a discussion of

non-tax-basis income statements and related non-tax-basis balance sheets to be used in the preparation of Schedule M-3 and of Form 1120-S, Schedule L.