You request a ruling with respect to the Massachusetts income tax treatment of property subject to the federal Accelerated Cost Recovery System ("ACRS"). Specifically, you inquire for which taxable years Massachusetts will allow the ACRS deduction for property placed in service on or after January 1, 1981. You also inquire as to the determination of basis, for Massachusetts income tax purposes, to compute gain or loss upon the subsequent sale of such property.
The federal 1981 Economic Recovery Tax Act 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, §§ 1, 2). With certain exceptions, Massachusetts allows the deductions taken from federal gross income in determining federal adjusted gross income. (G. L. c. 6 2, § 2 (d) ) . For taxable years 1981 and 1982, the federal ACRS deduction did not apply for Massachusetts income tax purposes because for those years Chapter 62 references to the Internal Revenue Code ("Code") applied to the Code as amended on November 6, 1978. Effective for taxable years commencing on or after January 1, 1983, the word "Code" in Chapter 62 is redefined to refer to the Code as amended on February 1, 1983. (G.L. c. 62, § 1(c)) As a result of the recent amendment, the Massachusetts personal income statute incorporates the cost recovery method rules of ACRS. Under current Massachusetts income tax law, there are no provisions which modify the federal rules regarding the ACRS deduction or other depreciation deductions. Also, there are no provisions which modify the federal rules for determining the basis of property for purposes of computing gain or loss.
Based on the foregoing, it is ruled that:
1. For Massachusetts personal income tax 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.
2. For Massachusetts personal income tax purposes, in determining gain or loss, the Massachusetts 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.
Very truly yours,
Commissioner of Revenue
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