§ 469(i)(3)(A), the taxpayer is limited to the same amount taken on the federal return for Massachusetts purposes. For example, if a taxpayer had federal adjusted gross income in excess of $100,000 which reduced or eliminated the offset allowance under I.R.C.
#Non passive income pro#
When completing the pro forma federal Form 8582, the taxpayer must limit the amount of the $25,000 allowance for rental real estate activities with active participation to the amount which was allowed the taxpayer for federal purposes. To do so, the taxpayer must complete a pro forma federal Form 8582, using only those amounts from activities which generate income subject to Massachusetts tax. For Massachusetts purposes, a nonresident must recalculate allowed passive activity losses based upon income or losses from passive activities which generate income subject to tax in Massachusetts. Losses disallowed for federal purposes are likewise disallowed for Massachusetts purposes.įor nonresidents, passive activity income and losses which are not attributable to Massachusetts must be taken out of the amounts of these items reported for federal purposes. Taxpayers must refer to section four of this TIR to determine reporting requirements for passive losses incurred before January 1, 1988. To the extent there are applicable adjustments for Massachusetts differences, taxpayers must calculate allowable losses on a pro forma federal Form 8582. Also, the net passive activity income or loss is the same as allowed on federal Form 8582, line 17. On the taxpayers' Massachusetts returns in prior taxable years. Allowable losses are the same losses that are allowed on federal Form 8582, line 19, to the extent that the losses were not deducted The Massachusetts treatment of passive activity losses for Massachusetts residents is the same as the federal treatment. Calculation of Passive Activity Losses for Massachusetts Purposes The purpose of this Technical Information Release (TIR) is to clarify, for taxable years beginning on or after January 1, 1988, four major issues on the Massachusetts treatment of passive activity losses.ġ. All taxpayers must maintain records sufficient to substantiate passive activity income and losses. A taxpayer who disposes of the taxpayer's entire interest in the activity in a fully taxable transaction to an unrelated party may at the time of disposition claim any unused suspended deductions in full.įederal income tax limitations and phase-out amounts for passive activity loss deductions and rental real estate apply for Massachusetts income tax purposes to resident, part-year resident, and nonresident taxpayers.
The passive activity loss is suspended and carried forward to reduce passive activity income generated in future years. Generally, passive activity losses may not be deducted from other income for the taxable year. In general, a passive activity loss is the amount, if any, by which the passive activity deductions for the taxable year exceed the passive activity gross income for the taxable year.
#Non passive income code#
Through Chapter 106 of the Acts of 1988, Massachusetts adopted for income tax purposes the Code as amended on January 1, 1988, and in effect for the taxable year. The new provision limits the amount of passive activity loss that can be claimed as a deduction for federal income tax purposes. The federal Tax Reform Act of 1986 ("TRA '86") added the passive activity loss rules of section 469 to the Internal Revenue Code (the "Code") for taxable years beginning January 1, 1987.