February 16, 1978

The following answers are submitted in answer to the two questions submitted in your letter to this office under date of January 25, 1978.

1. A security corporation taxable in Massachusetts under G.L. Chapter 63, Section 38B, may not apply any amount of capital loss against dividend or interest income for any given tax year. Such losses may be employed only in reduction of capital gains realized in the year during which the capital loss occurred. The Massachusetts Corporation Excise tax, G.L. Chapter 63, contains no section providing for capital loss carryover.

2. The Department has always maintained that there has been no change of position concerning the treatment of wholly-owned DISC sales as first expressed in Corporation Excise Tax Ruling 1972-2. If the DISC is doing business in a foreign country, the inclusion or the exclusion of its sales, in the numerator of the parent corporation depends upon whether or not the DISC is subject to the jurisdiction to tax by the foreign country. The true intent of Ruling 1972-2 was enacted into law as expressed under provision of Sts. 1973, C. 752, Secs. 2, 4, and 7. The sales made by the DISC are treated as sales by the parent and thus are accumulated in the numerator of the parent in the same manner provided by G.L. Chapter 63, Sec. 38, by the same tests as inclusions are required of the parent for apportionment of income to Massachusetts for excise tax purposes.

Very truly yours,

/s/Laurence D. Fitzmaurice

Laurence D. Fitzmaurice
Commissioner of Corporations
and Taxation

LR 78-4