Instructions For Form 1 - Massachusetts Resident Income Tax

2006 Form 1 — Schedule Instructions

Line 24. Short-Term Gains and

Part 4. Taxable Interest, Dividends

The law defines “capital gain income” as gain from

the sale or exchange of a capital asset. The defini-

Long-Term Gains on Collectibles

and Certain Capital Gains

tion of “capital asset” includes: (1) an asset which

Enter the amount from Schedule B, line 19. If

Line 36. Excess Exemptions

is a capital asset under IRC sec. 1221, or (2) prop-

Schedule D, line 12 is “0” or greater, omit line 25

Enter the amount from line 7 of the Excess Ex-

erty that is used in a trade or business within the

and enter the amount from line 24 in line 26. If

emption and Excess Home Heating Fuel Deduction

meaning of IRC sec. 1231(b) without regard to the

Schedule D, line 12 is a loss, go to Schedule B,

Worksheet (only if single, head of household or

holding period as defined in said sec. 1231(b).

line 25.

married filing a joint return and Form 1, line 18 is

Differences

greater than Form 1, line 17).

Line 25. Long-Term Losses Applied

Significant differences between the U.S. and Mass-

Against Short-Term Gains

achusetts capital gain provisions are:

Long-Term Capital Losses Applied Against

◗ IRC sec. 1244 losses reported as ordinary losses

If Schedule B, line 24 is greater than “0,” and

Interest and Dividends Worksheet for Sched-

Schedule D, line 12 is a loss, enter the smaller of

on your U.S. return must be reported on Mass-

ule B, Line 32 and Schedule D, Line 15. Com-

Schedule B, line 24 or Schedule D, line 12 (con-

achusetts Schedule D;

plete only if Schedule B, line 31 is a positive

◗ If you made a federal election under § 3181 of

sidered as a positive amount) in Schedule B, line

amount and Schedule D, line 14 is a loss.

25 and in Schedule D, line 13.

Enter all losses as positive amounts.

the Tax Relief Act of 1997 to recognize gain on the

deemed sale of a capital asset held on January 1,

1. Enter amount from Schedule B,

Line 27. Long-Term Gains Deduction

2001, Massachusetts does not follow the federal

line 29 . . . . . . . . . . . . . . . . . . . . . . .

Complete only if lines 11 and 26 are greater

rules at § 311 for determining the basis of the asset.

2. Enter the lesser of line 1 or $2,000

than”0.” If there is no entry in line 11, enter “0.” If

See TIR 02-3. If you sold a capital asset in 2006

3. Enter the amount from Schedule B,

line 11 shows a gain, enter 50% of line 11 minus

for which you made a federal § 311 election, the

line 30 . . . . . . . . . . . . . . . . . . . . . . .

50% of losses in lines 16, 17, 18 and 25, but not

Massachusetts initial basis will not be the federal

4. Subtract line 3 from line 2. If “0” or less

less than “0.”

basis. The Massachusetts initial basis will be deter-

omit the remainder of worksheet. Otherwise,

complete lines 5 and 6 . . . . . . . . . .

mined as of the date the asset was first acquired;

Example: Jack has a long-term capital gain on

◗ Upon the sale of stock of an S corporation, the

5. Enter any loss from Schedule D, line 14

collectibles of $1,000 entered in line 11 and line

as a positive amount. Otherwise,

federal basis must be modified according to

15. He does not have any other interest income

enter “0” . . . . . . . . . . . . . . . . . . . . .

Massachusetts Income Tax Regulation, 830 CMR

(other than interest from Massachusetts banks)

6. If line 4 is smaller than or equal to line 5,

62.17A.1; and

and dividend income. Jack also has a short-term

enter line 4 here and in Schedule B, line 32 and

◗ Massachusetts has adopted basis adjustment

capital loss of $100 entered in line 16 and a prior

in Schedule D, line 15. If line 4 is larger than line

rules to take into account differences between Mass-

year short-term unused loss of $200 entered in

5, enter line 5 here and in Schedule B, line 32

achusetts and federal tax laws. For more informa-

line 18. Jack enters $350 in line 27: $500 (50% of

and in Schedule D, line 15 . . . . . . . .

tion regarding basis adjustment rules, see TIR 88-7.

$1,000) minus $150 (50% of $300) = $350.

Net ordinary losses that are itemized deductions

Part 3. Adjusted Gross Interest,

Schedule D

on U.S. Schedule A are not allowable.

Dividends Short-Term Capital Gains

Installment Sales

Note: If showing a loss, be sure to mark over the

and Long-Term Gains on Collectibles

If a sale was treated as an installment sale for U.S.

“X” in the box to the left.

Line 31. Subtotal Interest and

income tax purposes, it may be treated the same

Long-Term Capital Gains and

Dividends

way on your Massachusetts income tax return.

Gains from pre-1996 installment sales are classi-

Losses Excluding Collectibles

If Schedule D, line 14 is “0” or greater, omit Sched-

fied as either capital gains or ordinary income under

ule B, line 32 and enter the amount from Sched-

You must complete Massachusetts Schedule D if

the Massachusetts law in effect on the date the sale

ule B, line 31 in Schedule B, line 33. If Schedule

you had long-term gains or losses from the sale or

or exchange took place.

D, line 14 is a loss, go to Schedule B, line 32.

exchange of capital assets or from similar transac-

tions which are granted capital gain or loss treat-

Gains from pre-1996 installment sales that are clas-

Line 32. Long-Term Losses Applied

ment on your U.S. return, or if you had capital

sified as capital gains should be reported as 12%

Against Interest and Dividends

gain distributions. If you did not file U.S. Sched-

income on Massachusetts Schedule B. If the asset

ule D but are reporting capital gain distributions

If Schedule B, line 31 is a positive amount and

was held for more than one year when it was sold,

on U.S. Form 1040, line 13 or 1040A, line 10, you

Schedule D, line 14 is a loss, complete the Long-

the gain will be eligible for a 50% long-term deduc-

must complete Massachusetts Schedule D (see

Term Capital Losses Applied Against Interest and

tion. Gains from pre-1996 installment sales that

line 5 instructions). Include gains from all prop-

Dividends Worksheet for Schedule B, Line 32

are classified as capital gains included on Mass-

erty, wherever located. Long-term capital gains are

and Schedule D, Line 15. When completing the

achusetts Schedule D, line 3 should be reported on

gains on the sale or exchange of capital assets

worksheet, be sure to enter all losses as a posi-

Massachusetts Schedule D, line 11 (“Long-term

that have been held for more than one year on the

tive amount.

gains on collectibles and pre-1996 installment

date of the sale or exchange. Long-term capital

sales”). The amount of such gain is then reported

losses are losses on the sale or exchange of cap-

on Massachusetts Schedule B, Part 2, line 11.

ital assets that have been held for more than one

year on the date of the sale or exchange.

Instructions For Form 1 - Massachusetts Resident Income Tax - 2006 Page 25

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