You request a ruling with respect to the Massachusetts income tax treatment of property subject to the federal Accelerated Cost Recovery System ("ACRS"). You inquire as to the method of depreciation or cost recovery that Massachusetts will allow for property placed in service on or after January 1, 1981. You also inquire as to the determination of gain or loss upon the subsequent sale of such property on or after January 1, 1983.
The federal Economic Recovery Tax Act of 1981 introduced ACRS for recovering the cost of property placed in service on or after January 1. 1981.
Massachusetts gross income is federal gross income with certain modifications. (G.L. c. 62, §§ 11 2). With certain exceptions, Massachusetts allows the deductions taken from federal gross income in determining federal adjusted gross income. (G.L. c. 62, § 2(d)). Federal gross income is gross income as defined under the "Code". (G.L. C. 62, § 1(d)). For taxable years 1979 through 1982 inclusive, references to the "Code" in Chapter 62 applied to the Internal Revenue Code as amended on November 6, 1978. (G. L. c. 62, § 1(c) as amended by St. 1979, c. 408, § 1). Thus, for taxable years 1981 and 1982, the federal ACRS deduction did not amply for Massachusetts income tax purposes.
Effective for taxable years commencing on or after January 1, 1983, the word "Code" in Section 1(c) of Chapter 62 is redefined to refer to the Internal Revenue Code as amended on February 1, 1983 (St. 1983, c. 233, § 11). As a result of the 1983 amendment, the Massachusetts personal income tax statute incorporated the cost recovery method rules of ACRS. Under current Massachusetts income tax law, there are no provisions which modify the federal ACRS or other depreciation deductions.
Prior to repeal, Massachusetts General Laws Chapter 62, Section 7 provided for the adjustment of federal basis in arriving at Massachusetts basis. This adjustment provided for differences between the federal and the state basis in property. The repeal of Section 7 is applicable to taxable years beginning after 1979. (St. 1979, c. 409). There are currently no provisions under Massachusetts law to adjust federal basis in the determination of gain or loss for Massachusetts purposes.
For taxable years beginning on or after January 1, 1983, the Massachusetts deduction for depreciation or cost recovery for property placed in service on or after January 1, 1981 is the federal deduction for such property.
For Massachusetts personal income tax purposes, the basis of property placed in service on or after January 1, 1981 and sold on or after January 1, 1983 is the federal adjusted basis for such property with no adjustment for determining gain or loss.
Very truly yours
Commissioner of Revenue
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