November 17, 1980
********** ("Employee"), a Massachusetts resident, died on February 6, 1980. He was entitled to benefits from a qualified profit-sharing plan, as defined in Section 401(a) of the Internal Revenue Code ("Code"). The benefits were distributed to his widow in a lump-sum; within 60 days of distribution she "rolled over" the benefits within the meaning of Section 402(a) of the Code into an Individual Retirement Account, as defined in Section 408(a) of the Code.
You represent that the lump-sum distribution of benefits is not included in the widow's federal gross income or in the Employee's federal gross estate. You inquire whether it is included in the widow's Massachusetts gross income and in the Employee's Massachusetts gross estate.
"Massachusetts gross income" is defined in Massachusetts General Laws Chapter 62, Section 2 as federal gross income with certain modifications. Chapter 62, Section 1 defines "federal gross income" as "gross income as defined under the Code," and for purposes of the Massachusetts income tax, it provides that "Code" means the Internal Revenue Code as amended on November 6, 1978 and in effect for the taxable year.
The Code now provides in Section 402(a)(7) that up to a maximum amount, any portion of a qualifying rollover distribution attributable to an employee, paid to the spouse of the employee after the employee's death, will not be includible in the spouse's gross income for the taxable year in which paid, if the spouse rolls over the distribution within 60 days into an individual retirement plan in accordance with Section 402(a). Section 402(a)(7) of the Code was added by Section 157(g) of Public Law 95-600, effective for lump-sum distributions completed after December 31, 1978, in taxable years ending after such date; it was amended by Section 101(a)(14)(C) of the Technical Corrections Act of 1979 (P.L. 96-222), effective for the same period.
The Code as amended on November 6, 1978 and in effect for the taxable year provided that, up to a maximum amount, a distribution from a qualified trust was not includible in gross income for the taxable year in which paid if, among other requirements, "the balance to the credit of an employee in a qualified trust [was] pay to him in a qualifying rollover distribution." Code Section 402(a)(5)(A) (emphasis supplied).
Based on the foregoing, it is ruled that the lump-sum distribution is included in the widow's 1980 Massachusetts gross income, except to the extent that it or any part of it would have been excluded from her federal gross income had the distribution been made on November 6, 1978.
Massachusetts General Laws Chapter 65C, Section 1(f) provides that the Massachusetts gross estate is the federal gross estate less the value of real and tangible personal property having an actual situs outside Massachusetts. Section 1(d) of Chapter 65C defines "[f]ederal gross estate" as the gross estate as defined under the Code, and for purposes of the Massachusetts estate tax, Section 1(a) provides that "Code" means the Internal Revenue Code as amended and in effect on January 1, 1975.
Under Section 2039(a) of the Code as amended and in effect on January 1, 1975, the gross estate generally included the value of an annuity or other payment receivable by any beneficiary by reason of surviving a decedent.
Section 2039(c) of the Code excluded from the federal gross estate "the value of an annuity or other payment receivable by any beneficiary (other than the executor) under...an employees' trust...forming part of a pension, stock bonus, or profit-sharing plan which, at the time of the decedent's separation from employment (whether by death or otherwise), or at the time of termination of the plan if earlier, met the requirements of section 401(a)." However, Section 2039(c) further provided that if the amounts payable after the death of the decedent under a qualified plan were attributable to any extent to payments or contributions made by the decedent, no exclusion would be allowed for that part of the value of such amounts in the proportion that the total payments or contributions made by the decedent bore to the total payments or contributions made.
Based on the foregoing, it is ruled that the lump-sum distribution from the qualified profit-sharing plan is not included in the Employee's Massachusetts gross estate, except for any part of the distribution in the proportion that the total payments or contributions made by the decedent bore to the total payments or contributions made.
Very truly yours,
/s/L. Joyce Hampers
L. Joyce Hampers
Commissioner of Revenue