February 21, 1985

Under Section 1001 of the Federal Tax Reform Act of 1984, amending Internal Revenue Code Section 1222, the holding period for long-term capital gain and loss treatment of property acquired after June 22, 1984 and before January 1, 1988 was reduced from "more than one year" to "more than six months". You inquire whether, for corporate excise purposes, Massachusetts has adopted the six month long-term holding period.

For Massachusetts corporate excise purposes, gross income is defined as gross income under the Federal Internal Revenue Code ("Code"), as amended and in effect for the taxable year, plus the interest from bonds, notes and evidences of indebtedness of any state, including this Commonwealth. (G.L. c. 63, § 30(5)(a)). Under the Code, gross income means all income from whatever source derived, including gains derived from dealings in property. (I.R.C. § 61(a)(3)).

For Massachusetts corporate excise purposes, net income is defined as gross income less certain deductions, but not credits, allowable under the provisions of the Code, as amended and in effect for the taxable year. (G.L. c. 63, § 30(5)(b)). For example, Code Section 1212 deductions (capital loss carrybacks and carryovers) are not allowed in determining Massachusetts net income, except net operating loss carryovers may be deducted in the first five consecutive taxable years of a corporation. (G.L. c. 63, § 30(5)(b)(ii)).

In the determination of the Massachusetts corporate excise, Massachusetts General Laws utilizes federal gross income and certain federal deductions under the Code in effect for the taxable year. Therefore, the change in the federal holding period for long-term capital gain and loss treatment of property acquired after June 22, 1984 and before January 1, 1988, made under Section 1001 of the Federal Tax Reform Act of 1984, amending Internal Revenue Code Section 1222, is automatically adopted by Massachusetts for corporate excise purposes.

Very truly yours,

/s/Ira A. Jackson

Ira A. Jackson

Commissioner of Revenue

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LR 85-26