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Generally, any foreign corporation that is required to complete Form 1120-F, Section II, must complete Schedules M-1 and M-2 (Form 1120-F).
Only enter expenses you want to deduct in full in the K-1 input screen. To amortize the amount, enter the expense on Screen 22, Depreciation and tie the asset to the pass-through entity.
In Form 1065, U.S. Return of Partnership Income, Schedule M-1 is used to reconcile the income that the partnership is reporting on the tax return with the income in its accounting records.
If the total assets at the end of the corporations tax year equal or exceed $10 million, the corporation must file Schedule M-3. A U.S. corporation filing Form 1120-S that isnt required to file Schedule M-3 may voluntarily file Schedule M-3 instead of Schedule M-1.
Any entity that files Form 1065 must file Schedule M-3 (Form 1065) if any of the following is true. The amount of total assets at the end of the tax year reported on Schedule L, line 14, column (d), is equal to $10 million or more. The amount of adjusted total assets for the tax year is equal to $10 million or more.
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How partnerships are taxed. As is the case with a sole proprietorship, a partnership is considered a pass-through entity for tax purposes. In other words, the partnership itself is not taxed, but each partner is responsible for reporting their own profits and losses from the business on their individual tax returns.
Purpose of Schedule Schedule M-3, Part I, asks certain questions about the partnerships financial statements and reconciles financial statement net income (loss) for the consolidated financial statement group to income (loss) per the income statement for the partnership.

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