Form 355s - Massachusetts S Corporation Excise Return

Line by Line Instructions

income. These taxes are deductible for U.S. tax

any interest from term and time deposits. Enclose

sec. 1231(b) without regard to the holding period

purposes, but are not deductible in Massachusetts.

a statement listing bank sources and amounts.

defined in said section 1231(b).

Note: This amount should not include any 5.25%

Line 22

Line 42

interest from Massachusetts banks derived in the

Enter in line 22 any income or loss included in

Enter the amount of any gain from collectibles held

ordinary course of the trade or business activity of

lines 18 and/or 19 which is granted treatment by

for more than one year.

the S corporation, and properly reported in line 18.

the U.S. government or is classified as a capital

Collectibles are defined as any capital asset that is a

gain or loss for Massachusetts purposes.

Line 31

collectible within the meaning of IRC sec. 408(m),

For Massachusetts purposes capital gain or loss

Enter the total amount of interest (other than from

as amended and in effect for the taxable year, in-

is the gain or loss from the sale or exchange of a

Massachusetts banks) and dividend income in-

cluding works of art, rugs, antiques, metals,

capital asset. A capital asset is: (1) an asset which

cluded in line 28. Do not include interest on U.S.

gems, stamps, alcoholic beverages, certain coins,

is a capital asset for U.S. income tax purposes or

debt obligations that is taxable by the U.S. govern-

and any other items treated as collectibles for fed-

(2) property that is used in a trade or business

ment, but is tax-exempt in Massachusetts. Enclose

eral tax purposes.

within the meaning of IRC section 1231(b) without

a statement listing sources and amounts.

Line 43

regard to the holding period defined in said sec-

Line 32

Report any adjustments to Massachusetts capital

tion 1231(b).

Enter the total amount of the S corporation’s non-

gain and losses. Enclose a complete statement ex-

Line 24

Massachusetts state and municipal bond interest.

plaining any such adjustments.

Report and describe any other adjustments to

This interest is taxable in Massachusetts but not

If an S corporation is taxable at the federal level,

Massachusetts income and deductions not re-

taxed by the U.S. government and thus not re-

and thus the state level, on certain capital gains

ported elsewhere on Schedule S.

ported on U.S. Form 1120S, Schedule K, line 4.

under IRC sec. 1374, then the amount of the cap-

For Massachusetts tax purposes, an S corporation

ital gains passed through to the shareholder is re-

Line 33

is allowed only those expense deductions that an

duced by the tax paid at the federal and state

Enter the total amount of royalty income included

individually owned business is allowed. Deductions

level. Reduce the S corporation’s capital gain by

in line 28.

that are itemized by an individual on Schedule A of

the amount of federal and state tax paid by the S

Note: This amount should not include any royalty

U.S. Form 1040, are not allowed. The deductions

corporation and enclose the computation of the

income derived in the ordinary course of the trade

for a net operating loss carryover or carryback are

tax shown on U.S. Form 1120S, line 22(b).

or business activity of the S corporation and prop-

neither allowed to the S corporation nor to an in-

Resident and Nonresident

erly reported in line 18.

dividual under Massachusetts income tax law.

Reconciliation

If an S corporation is taxable at the federal level,

Line 34

Lines 44 through 47 should be completed only if all

and thus at the state level, on passive investment

Enter the total amount of other income included in

three of the following conditions are met: (a) there

income under IRC sec. 1375, then such income

line 28, less the amounts of other income included

is one or more nonresident shareholders; (b) there

passed through to the shareholder is reduced by

in lines 29 through 33.

is any income derived from business activities or

the item’s portion of the tax paid at the U.S. and

ownership of any interest in real or tangible prop-

state level. Reduce the S corporation’s Massachu-

Capital Gains and Losses

erty in another state; (c) such business activities

setts ordinary income by the amount of the federal

If the S corporation had any income or loss re-

provide the other state the jurisdiction to levy any

and state tax paid by the S corporation. Enclose

ported in U.S. Form 1120S, Schedule K, line 10

income or franchise tax.

the computation of the tax shown on U.S. Form

that is granted capital gains treatment by the U.S.

1120S, line 22(b).

When completing line 45 exclude any income from

government, include that amount in lines 35

unrelated business activities prior to apportion-

Also report the cost of renovating a qualifying

through 42, as applicable.

ment, see Regulation 830 CMR 63.38.1, sections

abandoned building. Enclose a statement detailing

Line 38

(3) and (4). Enclose a statement and explain any

the location and cost of renovating the qualifying

adjustments.

Enter the amount of any loss on the sale exchange

abandoned building.

or involuntary conversion of property used in a

Form 355S, Schedule F should be completed be-

Line 28

trade or business and held for one year or less

fore completing lines 44 through 47.

Add U.S. Form 1120S, Schedule K, lines 4, 5a

(from U.S. Form 4797).

and 6 and enter the total in line 28.

Schedule SK-1

Line 41

Line 29

Enter in line 41 any long-term capital gain or loss

On the Schedule SK-1 for each shareholder, the S

Enter the total amount of interest on U.S. debt

that is not included in lines 39 and/or 40 that is

corporation should indicate the entity type of the

obligations reported in line 28 which is taxable

granted capital gains treatment by the U.S. gov-

shareholder. The S corporation should obtain this

by the U.S. government, but is tax-exempt in

ernment or is classified as a capital gain or loss for

information from the shareholder. The S corpora-

Massachusetts.

Massachusetts purposes. For Massachusetts pur-

tion should select “Bank” if the shareholder is an

poses capital gain or loss is the gain or loss from

IRA or a Roth IRA and the S corporation is a bank

Line 30

the sale or exchange of a capital asset. A capital

or depository institution holding company. The S

Enter the total amount of interest from Massachu-

asset is: (1) an asset which is capital asset for U.S.

corporation should select “Exempt organization” if

setts banks included in line 28. Report any inter-

income tax purposes or (2) property that is used

the shareholder is exempt from federal income tax

est from Massachusetts savings accounts, saving

in a trade or business within the meaning of IRC

under IRC sec. 501.

share accounts and NOW accounts. Also report

Form 355s - Massachusetts S Corporation Excise Return - 2012 Page 16

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