Have a Tax Question? Ask a Tax Expert
Corporate equity can be easily found on Schedule L of Form 1120/1120S. It is a combination of all lines from Capital Stock to cost of treasury stock. This is the book equity of the company. It may or may not be the true equity of the company because many if not all assets are carried at cost and/or are depreciated.
Whether C or S Schedule M-1 reconciles book income with tax income. The book income is then added to retained earnings or S corp equity accounts on Schedule M-2. M-2 is the "retained earnings" portion of the equity. It does not include stock, paid in capital or treasury stock.
Schedule K on an S corp return shows the various types of income/deductions. These amounts are combined and totaled on line 18. This amount should match line 8 on Schedule M-1.