Directive

Directive Directive 86-3: Interest Earned On Bank Repurchase Agreements

Date: 06/12/1986
Organization: Massachusetts Department of Revenue
Referenced Sources: Massachusetts General Laws

Personal Income Tax

 

FACTS: Taxpayer Smith enters into a bank repurchase agreement with Safety Bank & Trust in which Taxpayer Smith purchases Treasury obligations for a specified amount. Safety Bank & Trust will repurchase the obligations from Taxpayer Smith within 90 days for the specified amount, including interest. The Treasury obligations remain in the possession of Safety Bank & Trust at all times.

ISSUE: Must Taxpayer Smith include the interest earned on the bank repurchase agreement in Part A income?

DISCUSSION: Massachusetts gross income is divided into two classes, Part A and Part B gross income. G.L. c. 62, § 2(b). Part A income is comprised of interest, dividends, and net capital gain other than interest and dividends from savings deposits in banking institutions in Massachusetts. G.L. c. 62, § 2(b)(1). Part B income is all other income subject to taxation. G.L. c. 62, §2(b)(2). A bank repurchase agreement is not a savings deposit, but is in effect a loan by a bank customer to a bank. Consequently, interest earned on a bank repurchase agreement is Part A income, taxable at a rate of 10%.

DIRECTIVE: Taxpayer Smith must include the interest earned on the bank repurchase agreement in Part A income, taxable at the rate of 10%. This directive is prospective in effect and revokes Letter Ruling 78-2.
 

REFERENCE: G.L. c. 62, § 2(b)(1), (2).
 

/s/Ira A. Jackson
Ira A. Jackson
Commissioner of Revenue
 

June 12, 1986
 

DOR-D 86-3
 

 

This Directive represents the official position of the Department of Revenue on the application of the law to the facts as stated. The Department and its personnel will follow this Directive, and taxpayers may rely upon it, unless it is revoked or modified pursuant to 830 CMR § 62C.01(5)(e). In applying this Directive, however, the effect of subsequent legislation, regulations, court decisions, Directives, and TIRs must be considered, and Department personnel and taxpayers may rely upon this Directive only if the facts, circumstances and issues presented in other cases are substantially the same as those set forth in this Directive.

Table of Contents

Referenced Sources:

Feedback

Did you find what you were looking for on this webpage? * required
We use your feedback to help us improve this site but we are not able to respond directly. Please do not include personal or contact information. If you need a response, please locate the contact information elsewhere on this page or in the footer.
We use your feedback to help us improve this site but we are not able to respond directly. Please do not include personal or contact information. If you need a response, please locate the contact information elsewhere on this page or in the footer.

If you need to report child abuse, any other kind of abuse, or need urgent assistance, please click here.

Feedback