December 3, 1981

You request a ruling concerning the Massachusetts income tax consequences of the liquidation of the ********** ("Trust"), a Massachusetts realty trust.

The Trust was organized on August 1, 1960 as a Massachusetts corporate trust, and is engaged in the business of leasing real estate situated in Massachusetts. Its principal place of business is ********** Rhode Island. It has 75 shares of beneficial interest, 25 of which are held by each of three shareholders, one of which is an individual and two of which are trusts. The individual shareholder is not a Massachusetts resident, and the shareholders that are trusts were created under the wills of persons who died non-residents of Massachusetts.

Under the Trust's proposed plan of liquidation, the trustees will be authorized and directed to wind up the Trust's affairs, to collect and reduce to possession its assets, to pay or provide for its liabilities, and to distribute the assets, subject to all remaining liabilities, to its shareholders in proportion to and in cancellation of the number of shares owned by them. The Trust will not sell its assets prior to the liquidation.

A Massachusetts corporate trust is subject to taxation under Chapter 62 of the General Laws. Massachusetts gross income is federal gross income as defined under the Internal Revenue Code, with certain modifications (G.L. c. 62, ss. 1, 2). With exceptions not here relevant, the Massachusetts adjusted gross income of a corporate trust is determined as though it were a resident natural person (G.L. c. 62, s. 8(a)); accordingly, only those provisions of the Code applicable to natural persons apply in the determination of the Massachusetts adjusted gross income of a corporate trust ( see B.W. Company v. State Tax Commission, 370 Mass. 18, 21 n. 4 (1976)).

For federal tax purposes, the Trust is an association taxable as a corporation. Under Section 336 of the Code, a corporation ordinarily recognizes no gain or loss for federal tax purposes on the distribution of property in partial or complete liquidation.

Under Section 331 of the Code, amounts distributed in complete liquidation of a corporate trust are treated by shareholders as received in full payment in exchange for their shares in the trust.

Individual non-residents of Massachusetts and trusts created under the will of a person who died a non-resident of Massachusetts are subject to Massachusetts income tax only on their items of gross income from sources within the Commonwealth, that is, on items of gross income derived from or effectively connected with any trade or business carried on by the taxpayer in Massachusetts or derived from the ownership of any interest in real or tangible personal property in Massachusetts (G.L. c. 62, ss. 5A, 10(c), (d)).

Based on the foregoing, it is ruled that:

1. The distribution of the assets of the Trust in complete liquidation of the Trust will not result in the recognition of gain or loss to the Trust for Massachusetts income tax purposes.

2. Shareholders that are individual non-residents or trusts created under the wills of persons who died non-residents of Massachusetts will not be subject to Massachusetts income tax on receipt of the property of the Trust distributed to them in liquidation of the Trust.

Very truly yours,

/s/L. Joyce Hampers

L. Joyce Hampers
Commissioner of Revenue

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LR 81-102