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The instructions for Form 1065 Schedule M-2 line 3 state that this is generally the amount entered on line 9 of schedule M-1. They go on to state if net income includes income from guaranteed payments made to partners, remove such income on line 7.
Schedule M-2, Analysis of Partners Capital Accounts is the section in Form 1065, U.S. Return of Partnership Income where the partnership reports to the IRS what caused the changes to the partners capital accounts on the partnerships books and records.
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). However, the following rules apply. Do not complete Schedules M-1, M-2, and M-3 if total assets at the end of the tax year (Schedule L, line 17, column (d)) are less than $25,000.
Write your companys balance at the beginning of the year in Line 1 and write the net income (loss) per books in Line 2 of Schedule M-2. Itemize any other increases in Line 3. Add the totals from Lines 1, 2 and 3 and enter the result in Line 4.
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