Accounting

Pro Golf Warehouse, Inc. (PGW), sells golf equipment throughout the United States. PGW also sells golf equipment in Canada through its subsidiary, Canadian Golf Warehouse (CGW), which is organized as a Canadian corporation. In addition, PGW has an American subsidiary, Tennis Supplies, Inc. (TSI). PGW includes income (loss) from both subsidiaries on its audited financial statements, which show net income of $97 million in 2010. CGW, which is not consolidated by PGW for U.S. tax purposes, had net income of $31 million. TSI, which is consolidated for U.S. tax purposes, had a loss of $16 million.

How is this information reported on Schedule M–3?

For years ending after December 31, 2004, corporate taxpayers with total assets of $10 million or more are required to report much greater detail relative to differences between book and taxable income (loss).

What were the government’s objectives in creating this reporting requirement?

Solution:

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