Facts: Taxpayer Adams, a resident of Massachusetts, contributes $2,000 a year to his individual retirement account (IRA). During his most recent taxable year, Adams attains the age of 65 and begins receiving distributions from the IRA. At all times relevant, the IRA satisfies the requirements of section 408 of the Internal Revenue Code.

Issue 1: May Adams deduct the contributions to the IRA on his Massachusetts return?

Issue 2: To what extent are the distributions Adams receives from the IRA included in his Massachusetts gross income?

Discussion: Massachusetts gross income is federal gross income, with certain modifications. G.L. c. 62, § 2(a). Under federal law, an individual may deduct from gross income, within specified limits, amounts paid in the taxable year to the individual's IRA. I.R.C. §§ 219(a), 62(10). This deduction, however, is not allowed under Massachusetts law. G.L. c. 62, § 2(d)(9).

Distributions from an IRA are included in federal gross income in the year received. I.R.C. § 408(d). Massachusetts gross income is federal gross income with certain modifications. G.L. c. 62, § 2(a). As a modification to federal gross income, Massachusetts law provides a deduction for amounts received from an IRA until an amount equal to the prior contributions has been recovered. G.L. c. 62, § 2(a)(2)(F).

Directive 1: Taxpayer Adams may not deduct amounts contributed to the IRA on his Massachusetts return.

Directive 2: The distributions Adams receives from the IRA are not included in his gross income until he has recovered an amount equal to his previous contributions.

Reference: G.L. c. 62, § 2(a)(2)(F), (d)(9); I.R.C. §§ 62(10), 219, 408.

/s/Ira A. Jackson
Ira A. Jackson
Commissioner of Revenue

12 June 1986

DOR-D 86-9

This Directive represents the official position of the Department of Revenue on the application of the law to the facts as stated. The Department and its personnel will follow this Directive, and taxpayers may rely upon it, unless it is revoked or modified pursuant to 830 CMR § 62C.01(5)(e). In applying this Directive, however, the effect of subsequent legislation, regulations, court decisions, Directives, and TIRs must be considered, and Department personnel and taxpayers may rely upon this Directive only if the facts, circumstances and issues presented in other cases are substantially the same as those set forth in this Directive.