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2006 Form 1-NR/PY Instructions — Schedule Instructions

Schedule D

rules at sec. 311 for determining the basis of the

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

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

you wish to report a sale on your Massachusetts

2006 for which you made a federal sec. 311 elec-

return as an installment sale and the Massachu-

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

tion, the Massachusetts initial basis will not be the

setts gain is $1 million or greater, you must apply

X in the box to the left.

federal basis. The Massachusetts initial basis will

in writing to the Department of Revenue’s Install-

Long-Term Capital Gains and

be determined as of the date the asset was first

ment Sales Unit. See TIR 04-28. The Commis-

Losses Excluding Collectibles

acquired;

sioner of Revenue must approve your application

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

to report the sale on the installment basis in

Nonresidents. The long-term gain or loss realized

federal basis must be modified according to

Massachusetts before you file your return, and

from the transaction of assets being sold or ex-

Massachusetts Income Tax Regulation, 830 CMR

appropriate security must be posted. An explana-

changed which are considered to be from Mass-

62.17A.1; and

tory statement must be enclosed with each return

achusetts sources must be reported on Massachu-

◗ Massachusetts has adopted basis adjustment

for the life of the installment sale. For further in-

setts Schedule D. Long-term capital gains are

rules to take into account differences between

formation contact the Installment Sales Unit at

gains on the sale or exchange or capital assets that

Massachusetts and federal tax laws. For more in-

(617) 887-6950.

have been held for more than one year on the date

formation regarding basis adjustment rules, see

of sale or exchange. Long-term capital losses are

Long-Term Capital Gains and

TIR 88-7.

losses on the sale or exchange of capital assets

Losses, Excluding Collectibles

that have been held for more than one year on the

Net ordinary losses that are itemized deductions

date of sale or exchange. Massachusetts source

on U.S. Schedule A are not allowable.

Line 1. Long-Term Capital Gains

assets are (1) real or tangible personal property

and Losses

Installment Sales

located in Massachusetts and (2) property con-

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

If a sale was treated as an installment sale for

nected with a Massachusetts trade, business or

D, line 8, column f.

U.S. income tax purposes, it may be treated the

employment.

same way on your Massachusetts income tax re-

Line 2. Additional Long-Term

Part-year residents. The long-term gains or losses

turn. Gains from pre-1996 installment sales are

realized while you were a resident of Massachu-

Capital Gains and Losses

classified as either capital gains or ordinary income

setts, whether received from sources inside or out-

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

under the Massachusetts law in effect on the date

side of Massachusetts, from the sale or exchange

the sale or exchange took place.

D, line 9, column f.

of capital assets or from similar transactions

Gains from pre-1996 installment sales that are

which are granted capital gain or loss treatment

Line 3. Gain from Sales of Business

classified as capital gains should be reported as

on your U.S. return, or any capital gains distribu-

Property and Other Long-Term

12% income on Massachusetts Schedule B. If the

tions received, must be reported on Massachu-

Gains and Losses

asset was held for more than one year when it

setts Schedule D. Include gains from all property,

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

was sold, the gain will be eligible for a 50% long-

wherever located. Long-term capital gains are

D, line 11, column f.

term deduction. Gains from pre-1996 installment

gains on the sale or exchange or capital assets

sales that are classified as capital gains included

that have been held for more than one year on the

Line 4. Net Long-Term Gain or Loss

on Massachusetts Schedule D, line 3 should be

date of sale or exchange. Long-term capital losses

from Partnerships, S Corporations,

reported on Massachusetts Schedule D, line 11

are losses on the sale or exchange of capital as-

Estates and Trusts

(“Long-term gains on collectibles and pre-1996

sets that have been held for more than one year

installment sales”). The amount of such gain is

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

on the date of sale or exchange.

then reported on Massachusetts Schedule B, Part

D, line 12, column f.

The law defines “capital gain income” as gain from

2, line 11.

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

Line 5. Capital Gain Distributions

Gains from pre-1996 installment sales classified

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

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

as ordinary income and that are included on

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

tal gain distributions reported to you by a mutual

Massachusetts Schedule D, line 3 should be re-

erty that is used in a trade or business within the

fund or real estate investment trust included in the

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

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

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

ferences”). The amount of such gain classified as

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

line 10.

ordinary income should then be reported on Form

For a detailed explanation of the new law, see the

1-NR/PY, line 11 (“Other income”) and included

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

Department’s Regulation on Capital Gains and

on Schedule X, line 4 and identified as “2006 gain

gain distributions reported to you by a mutual

Losses at 830 CMR 62.4.1.

from pre-1996 installment sale.”

fund or real estate investment trust included in

Differences

U.S. Schedule D, line 13, column f.

Note: If you are reporting capital gains on install-

Significant differences between the U.S. and Mass-

ment sales that occurred during January 1, 1996

Line 6. Massachusetts Long-Term

achusetts capital gain provisions are:

through December 31, 2002, do not file Schedule

◗ IRC sec. 1244 losses reported as ordinary

Capital Gains and Losses Included

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

losses on your U.S. return must be reported on

in U.S. Form 4797, Part II

ment Sales. If you are reporting an installment

Massachusetts Schedule D;

sale occurring on or after January 1, 2003, report

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

◗ If you made a federal election under sec. 311 of

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

II treated as capital gains or losses for Massachu-

the Tax Relief Act of 1997 to recognize gain on the

obtained on DOR’s website at

setts purposes (not included in lines 1 through 5

deemed sale of a capital asset held on January 1,

above). These include ordinary gains from the sale

2001, Massachusetts does not follow the federal

Instructions For Form 1-Nr/py - Massachusetts Nonresident Or Part-Year Resident Income Tax - 2006 Page 30

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