Technical Information Release

Technical Information Release TIR 79-1: Taxation of Lump-Sum Distribution of Qualified Employee Benefit Plan

Date: 01/30/1979
Organization: Massachusetts Department of Revenue
Referenced Sources: Massachusetts General Laws

Personal Income Tax

In Daley v. State Tax Commission, 1978 Mass. Adv. Sh. (12-18-78), the Supreme Judicial Court ruled that there is a conflict between the provisions of General Laws, Chapter 62, as it relates to the taxation of lump-sum-distributions of qualified employee benefit plans, and the provisions of Art. 44 of the Amendments to the Massachusetts Constitution. Pursuant to said decision the entire distribution, exclusive of any employee contribution, is includible as 5% income, irrespective of the federal capital gains treatment granted to any part of such distribution.

For 1978 individual income tax returns, the taxable portion of such a distribution should be reported in its entirety in Item 16 of Massachusetts Form 1. Its source should be identified as "Lump-sum distribution of qualified employee benefit plan of _____ Corporation."

The capital gain portion of a lump-sum distribution included in Line 11 of Federal Schedule D should be entered in Item 6 of Massachusetts Form 1, Schedule D, with a notation of the source, and excluded in the computation of Massachusetts gain or (loss).

Income received by a non-resident of the Commonwealth as a lump-sum distribution of a qualified employee benefit plan constitutes an item of gross income from sources within the Commonwealth to the extent that it is effectively connected to past or present employment carried on by the non-resident in the Commonwealth.

The taxable portion of such a distribution should be entered in Item 16 of Massachusetts Form 1-NR with a notation of its source.

If, for a prior year, a taxpayer has reported any portion of such a lump-sum distribution as 10% income, an application for abatement (Form CA-6) should be filed within the period of time provided by law in order to abate the tax and receive a refund of any overpayment.

This release amends and supplements the provisions of the 1978 Massachusetts Resident Income Tax Instructions relating to capital gain appearing on Page 9; the provisions of the 1978 Massachusetts Non-Resident Income Tax Instructions relating to other income taxed at 5% appearing on Page 4, and Technical Information Release 78-1.

/s/ Daniel B. Breen
Commissioner of Revenue

January 30, 1979


TIR 79-1

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