Schedule 125 (income statement information)

Schedule 125 is where a corporation’s profit and loss goes on its T2 return. Buyers and lenders meet it when they ask for the filed return and set it against the seller’s own figures. If the two disagree, see what if the financials do not match the tax returns.

How the CRA describes it

The CRA’s guide to the General Index of Financial Information (GIFI) says Schedule 125 shows the income generated and the expenses incurred by the corporation during the tax year. The GIFI is a list of financial statement items, each with a code, and only the code and amount go on the return. The T2 guide lists Schedule 125 among the GIFI schedules, with Schedule 140, the summary income statement, at its end where it is needed. This entry covers the corporate T2 return only.

What to check or ask

• Ask for the T2 as filed, with its schedules, not only the seller’s own statements.
• Set each line against the seller’s income statement for the same year, and ask about every difference.
• The CRA says a corporation using the GIFI does not submit its financial statements with the return, and the CRA asks for them if needed; it tells insurers involved in underwriting to keep sending them. Ask for the full statements too.
• Ask how profit on the schedule was adjusted to net income for tax purposes; see Schedule 1.