Instructions For Form 1 - Massachusetts Resident Income Tax

2006 Form 1 — Schedule Instructions

◗ If in line 9 you entered amounts which increase

Gains from pre-1996 installment sales classified

Line 5. Capital Gain Distributions

as ordinary income and that are included on

the amounts reported from U.S. to Massachusetts,

If you did not file U.S. Schedule D, enter the capi-

Massachusetts Schedule D, line 3 should be re-

for example, a long-term gain reported as install-

tal gain distributions reported to you by a mutual

ported on Massachusetts Schedule D, line 9 (“Dif-

ment sales for U.S. tax purposes but not for Mass-

fund or real estate investment trust included in the

ferences”). The amount of such gain classified as

achusetts, add the amount in line 9 to the amount

amount from U.S. Form 1040, line 13 or 1040A,

ordinary income should then be reported on Form

in line 8.

line 10.

1, line 9 (“Other income”) and included on Sched-

If you did file a U.S. Schedule D, enter the capital

Line 11. Long-Term Gains on

ule X, line 4 and identified as “2006 gain from pre-

gain distributions reported to you by a mutual fund

Collectibles and Pre-1996

1996 installment sale.”

or real estate investment trust included in U.S.

Installment Sales

Note: If you are reporting capital gains on install-

Schedule D, line 13, column f.

Enter in line 11 the amount of long-term gains on

ment sales that occurred during January 1, 1996

Line 6. Massachusetts Long-Term

collectibles and pre-1996 installment sales classi-

through December 31, 2002, do not file Schedule

fied as capital gain income for Massachusetts

D. Instead, you must file Schedule D-IS, Install-

Capital Gains and Losses Included

purposes that are included in line 10.

ment Sales. If you are reporting an installment sale

in U.S. Form 4797, Part II

occurring on or after January 1, 2003, report those

Long-term gains on collectibles and pre-1996 in-

Enter amounts included in U.S. Form 4797, Part II

gains on Schedule D. Schedule D-IS can be ob-

stallment sales classified as capital gain income

treated as capital gains or losses for Massachu-

tained on DOR’s website at

for Massachusetts purposes are taxed at the 12%

setts purposes (not included in lines 1 through 5).

rate and should be entered on Schedule B, line 11.

Effective for sales on or after January 1, 2005, if

These include ordinary gains from the sale of Sec-

you wish to report a sale on your Massachusetts

tion 1231 property, recapture amounts under Sec-

Collectibles are defined as any capital asset that is

return as an installment sale and the Massachusetts

tions 1245, 1250 and 1255, Section 1244 losses

a collectible within the meaning of Internal Rev-

gain is $1 million or greater, you must apply in writ-

and the loss on the sale, exchange or involuntary

enue Code section 408(m), as amended and in

ing to the Department of Revenue’s Installment

conversion of property used in a trade or business.

effect for the taxable year, including works of art,

Sales Unit. See TIR 04-28. The Commissioner of

rugs, antiques, metals, gems, stamps, alcoholic

Line 7. Carryover Losses from

Revenue must approve your application to report

beverages, certain coins, and any other items

the sale on the installment basis in Massachusetts

Previous Years

treated as collectibles for federal tax purposes.

before you file your return, and appropriate secu-

If you have a carryover loss from a prior year, enter

rity must be posted. An explanatory statement

Line 12. Subtotal

in line 7 the total amount of carryover losses from

must be enclosed with each return for the life of

your 2005 Schedule D, line 22.

Subtract line 11 from line 10 and enter the result

the installment sale. For further information con-

in line 12.

Line 9. Differences

tact the Installment Sales Unit at (617) 887-6950.

If Schedule D, line 12 is a loss and Schedule B,

Enter any differences between the gains or losses

line 21 is less than “0,” omit Schedule D, lines 13

Long-Term Capital Gains and

reportable for Massachusetts tax purposes and the

through 15, enter the amount from Schedule D,

Losses, Excluding Collectibles

U.S. gains or losses reported in Massachusetts

line 12 in Schedule D, line 16, omit Schedule D,

Schedule D, lines 1 through 7. Differences include:

Line 1. Long-Term Capital Gains

lines 17 through 21 and enter the amount from

◗ Pre-1996 installment sales classified as ordi-

Schedule D, line 16 in Schedule D, line 22, and

and Losses

nary income for Massachusetts purposes;

enter “0” on Form 1, line 24.

Enter the gain or loss included in U.S. Schedule D,

◗ Long-term capital gains or losses from transac-

line 8, column f.

If Schedule D, line 12 is a gain and Schedule B,

tions reported as installment sales for U.S. income

line 21 is a loss, go to Schedule D, line 13.

tax purposes but not for Massachusetts; and

Line 2. Additional Long-Term

◗ Massachusetts has adopted basis adjustment

If Schedule D, line 12 is a loss and Schedule B,

Capital Gains and Losses

rules to take into account differences between

line 24 is “0” or greater, go to Schedule D, line 13.

Enter the gain or loss included in U.S. Schedule D,

Massachusetts and federal tax laws.

If Schedule D, line 12 is a gain, and Schedule B,

line 9, column f.

line 24 is “0” or greater, omit Schedule D, lines 13

Line 10. Adjusted Capital Gains and

Line 3. Gain from Sales of Business

through 15 and enter the amount from Schedule

Losses

D, line 12 in Schedule D, line 16.

Property and Other Long-Term

Exclude/subtract line 9 from line 8 and enter the

Gains and Losses

result in line 10.

Line 13. Capital Losses Applied

Enter the gain or loss included in U.S. Schedule D,

◗ If line 9 is a loss, add loss as a positive number

Against Capital Gains

line 11, column f.

to the amount recorded in line 8. See the follow-

If Schedule D, line 12 is a positive amount and

ing examples:

Schedule B, line 21 is a loss, enter the smaller of

Line 4. Net Long-Term Gain or Loss

Schedule D, line 12 or Schedule B, line 21 (con-

Schedule D

from Partnerships, S Corporations,

sidered as a positive amount) in Schedule D, line

Line

ex. A

ex. B

ex. C

ex. D

Estates and Trusts

13 and in Schedule B, line 22.

$1,000 $1,000 *$0,700**$700*

Enter the gain or loss included in U.S. Schedule D,

If Schedule D, line 12 is a loss and Schedule B, line

$1,500 *$1,300* $0,500 *$500*

line 12, column f.

24 is a positive amount, enter the smaller of Sched-

$1,500 $1,300 *$1,200**$200*

ule D, line 12 (considered as a positive amount) or

*denotes loss

Schedule B, line 24 in Schedule D, line 13 and in

Schedule B, line 25.

Instructions For Form 1 - Massachusetts Resident Income Tax - 2006 Page 26

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