Partnerships:

A partner in a partnership is subject to tax on his or her distributive share of the partnership's income or losses; a partner may also claim his or her distributive share of certain allowable deductions and credits.

Massachusetts basis starts with federal basis plus or minus certain adjustments.

Certain flow through deductions are not allowed:

  • deductions for charitable contributions or other U.S. Schedule A deductions;
  • net operating loss carryforward or carryback; and
  • deductions for state, local, or foreign taxes on income and any franchise, excise or capital stock taxes.

Certain items of income are treated differently for Massachusetts purposes:
  • certain capital gains and losses - the differences are based on the Massachusetts Capital Gain Regulation and U.S. tax law. For example, § 1244 stock losses and depreciation recapture may receive ordinary income reporting status on the U.S. return but are classified as capital assets for Massachusetts purposes;
  • portfolio income - interest on U.S. Debt obligations is not taxable by Massachusetts and interest from non-Massachusetts state and municipal bonds is taxable by Massachusetts.

S Corporation Adjustments:

A shareholder in an S Corporation is subject to tax on his or her distributive share of the corporation's income or loss; a shareholder may also claim his or her distributive share of certain allowable deductions and credits.

Massachusetts basis starts with federal basis plus or minus certain adjustments.

Certain flow-through deductions not allowed:
 

  • deductions for charitable contributions or other U.S. Schedule A deductions;
  • net operating loss carryforward or carryback; and
  • deductions for state, local, or foreign taxes on income and any franchise, excise or capital stock taxes.

Certain items of income are treated differently for Massachusetts purposes:

  • certain capital gains and losses - the differences are based on the Massachusetts Capital Gain Regulation and U.S. tax law. For example, § 1244 stock losses and depreciation recapture may receive ordinary income reporting status on the U.S. return but are classified as capital assets for Massachusetts purposes;
  • portfolio income - interest on U.S. Debt obligations is not taxable by Massachusetts and interest from non-Massachusetts state and municipal bonds is taxable by Massachusetts.

Where to Report on Original Tax Return; What to Enclose:

  • For tax years beginning on or after January 1, 2008, taxpayers with income or loss reported on a Schedule E must file their tax returns using computer-generated forms produced by third-party software. They are encouraged, but not required, to submit the return electronically. Paper forms produced using the third-party software product will contain a two-dimensional (2D) bar code and will also be accepted.

Documentation to Submit with Abatement/Amended Tax Return:

  • Copy of Form 1040X - Amended U.S. Individual Income Tax Return and amended Schedule E;
  • Massachusetts Form 1 or 1-NR/PY, amended Schedule E;
  • Copy of original and amended U.S. Form 1120S, Schedule K-1 - Shareholder's Share of Income, Credits, Deductions, etc.;
  • Amended Schedule SK-1 - Shareholder's Massachusetts Information;
  • Copy of amended U.S. Form 8582 - Passive Activity Loss Limitations (if applicable);
  • An itemized breakdown of your basis if claiming a loss.
  • Copy of original and amended U.S. Form 1065, Schedule K-1 - Shareholder's Share of Income, Credits, Deductions, etc.;
  • Amended Schedule 3K-1 - Shareholder's Massachusetts Information;
  • Copy of amended U.S. Form 8582 - Passive Activity Loss Limitations (if applicable);
  • An itemized breakdown of your basis if claiming a loss.

Massachusetts References:


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