The following information for 2020 relates to Sparrow Corporation, a calendar year, accrual method taxpayer: Net income per books (after-tax) $205,050 Federal income tax expense per books 55,650 Tax-exempt interest income 4,500 MACRS depreciation in excess of straight-line depreciation used for financial statement purposes 7,200 Excess of capital losses over capital gains 9,400 Nondeductible meals and entertainment 5,500 Interest on loan to purchase tax-exempt bonds 1,100 a. Regarding items that would be added back on the M–1 schedule, label either "Yes" (it would be added back to net income per books) or "No" (it would not be).
•Federal income tax expense per books
•Excess of capital loss over capital gains
•Tax-exempt interest income
•Excess of MACRS over book depreciation
•Interest on loan to purchase tax-exempt bonds
•Nondeductible meals and entertainment
b. Sparrow's taxable income for 2019 is $.
c. Prepare Schedule M–1 for 2019.
Enter all amounts as positive numbers. If an amount is zero, enter "0".
Schedule M-1Reconciliation of Income (Loss) per Books With Income per Return
1Net income (loss) per books . . . . . . . . . . . . .
2Federal income tax per books . . . . . . . . . . . .
3Excess of capital losses over capital gains . . .
4Income subject to tax not recorded on books this year (itemize):_ _ _ _ _ _ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
5Expenses recorded on books this year not deducted on this return (itemize):
aDepreciation . . . . . . . . . . . $
bCharitable contributions . . . $ _ _ _ _ _ _ _
cTravel and entertainment . . $
6Add lines 1 through 5 . . . . . . . . . . . . . . . . . .
7Income recorded on books this year not included on this return (itemize):
Tax-exempt interest $
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
8Deductions on this return not charged against book income this year (itemize):
aDepreciation . . . . . . . . . . . $
bCharitable contributions . . . . $ _ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
9Add lines 7 and 8 . . . . . . . . . . . . . . . . . . . . .
10Income (page 1, line 28)—line 6 less line 9 . .