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Schedule B (Form 1120) (Rev. 12-2014) Page 2
General Instructions Question 5. Changes in Accounting Principle
Section references are to the Internal Revenue Code The term “change in accounting principle,” means a
unless otherwise noted. change from one generally accepted accounting principle
to another generally accepted accounting principle as
Future Developments described in Statement of Financial Accounting
Standards (SFAS) No. 154—Accounting Changes and
For the latest information about developments related to
Error Corrections.
Schedule B (Form 1120) and its instructions, such as
legislation enacted after they were published, go to Answer “Yes” if a change in accounting principle
www.irs.gov/form1120. occurred during the tax year that affected (or is expected
to affect) the amount of income reported for financial
What's New statement purposes.
Some filers of Form 1120, U.S. Corporation Income Tax If the corporation has audited financial
Return, that file Schedule M-3 (Form 1120), Net Income statements, any changes in accounting
TIP
(Loss) Reconciliation for Corporations With Total Assets principle should be identified in footnotes to
of $10 Million or More, with tax years ending December those statements.
31, 2014, or later, are not required to file Schedule B
(Form 1120). See Who Must File, later. Question 6. Change in Method of Accounting
Purpose of Form Corporations are generally required to file Form 3115,
Application for Change in Accounting Method, or a
Use Schedule B (Form 1120) to provide answers to statement in lieu thereof, to request a change in a
additional questions for filers of Schedule M-3 (Form method of accounting. See the Instructions for Form
1120). 3115 for information on requesting a change in
Who Must File accounting method.
Generally, filers of Form 1120 that file Schedule M-3 Question 7. Voluntary Employees’ Beneficiary
(Form 1120), must complete and file Schedule B (Form Association Trusts
1120). However, for tax years ending December 31, 2014, Employers that establish and fund welfare benefit plans
or later, filers that (a) are required to file Schedule M-3 on behalf of their employees do so through a tax-exempt
and have less than $50 million in total assets at the end of trust that is referred to as a voluntary employees’
the tax year or (b) are not required to file Schedule M-3 beneficiary association (VEBA). See section 501(c)(9) and
and voluntarily file Schedule M-3, are not required to file Regulations sections 1.501(c)(9)-1 through 1.501(c)(9)-8
Schedule B (Form 1120). See the Instructions for for details.
Schedule M-3 (Form 1120) for more information. Answer “Yes” if the corporation owned any VEBA trusts
In the case of a consolidated group, a parent that were used to hold funds designated for employee
corporation files one Schedule B for the entire group. benefits.
Question 8. Indirect Costs
Specific Instructions
Section 446(a) and Regulation section 1.446-1(a)(1)
Question 1. Partnership Allocations generally provide that taxable income shall be computed
Answer “Yes” if this corporation is a partner in a under the method of accounting on the basis of which the
partnership and has received special allocations of corporation regularly computes its income in keeping its
income, gain, loss, deduction, or credit from such books. An exception applies if book income does not
partnership. clearly reflect income.
Example. P, a corporation, joins with B, an individual, Answer “Yes” if the corporation, during the tax year,
in forming the PB Partnership. P and B each contribute used an allocation method for indirect costs capitalized
$50,000 in cash to PB Partnership. Profits and losses are to self-constructed assets that varied from its financial
allocated equally, with the exception of depreciation, statement method of accounting. Otherwise, answer
which is allocated 99% to P and 1% to B. “No.” Also answer “No” if the corporation used the same
method of allocating indirect costs to self-constructed
P answers “Yes” to question 1 because its 99%
assets, but capitalized a different amount due to
allocation of depreciation deductions from PB Partnership
differences in the amount of costs which are includible
is disproportionate to its ratio of sharing other items of
in the computation of income for the tax year.
income, gain, loss, deduction, or credit from PB
partnership. Question 9. Mixed Service Costs
Answer “Yes” if the corporation, during the tax year,
treated purchasing, handling, and storage, as discussed
in Regulations sections 1.263A-3(c)(1) through (5), and as
defined in Regulations section 1.263A-1(e)(3)(ii)(F), (G),
and (H), as mixed-service costs as defined in Regulations
section 1.263A-1(e)(4)(ii)(C). Otherwise, answer “No.”
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