Mass Nonresident Decedent with Property

[tpert]

A taxpayer bought property in Massachusetts with intent to move there but died before completing the relocation. The estate sold the property.

Taxpayer was a New York resident up until the time of death and never took up residence in any other state. I know that there will be a need to file a Federal 1041 and a New York IT-205 to report the loss on the Massachusetts property.

Is there any required reporting to Massachusetts in this scenario?

Thanks.

[Koss]

Filing Requirements

The estate is probably going to have to file something, in order to report the gross proceeds from the sale of the property, and any gain or loss.

The decedent had no Massachusetts source income, so I don't see any filing requirement.

BMK

[Koss]

Mass Fiduciary Return

Massachusetts has a fiduciary tax return for estates and trusts. It has a bubble on it for a nonresident estate. And they have a special tax rate for capital gains...

http://www.mass.gov/dor/docs/dor/forms/inctax11/2-3/2.pdf

Good luck!



BMK

[Gary2]

In addition to the Massachusetts Form 2 to report the sale and show the loss, there's also the Massachusetts Form M-706 and M-NRA for the estate tax.

The MA exclusion for the estate tax is only $1M, so it affects many more people than the federal (especially given MA real estate prices). I don't have any real experience with MA estate tax, but my quick reading is that the filing requirement for non-resident is based on the value of their entire federal gross estate, whether or not a federal estate tax return is required, and even though they're only taxed on the proportion within MA.

The MA estate tax is based on the 1999-2000 federal estate tax, not the current federal tax. They go as far as to keep copies of the 1999 federal forms and instructions available on their web site. Since the real estate will either have to go through probate or be subject to an automatic lien, it behooves the executor to get the MA estate tax return prepared, at least to the extent of complete the 1999 federal 706 to determine whether the gross estate triggers the filing requirement.

Aside: If you're wondering why MA stuck with the 1999 federal tax, it's because it started out as a soak-up tax, i.e., it was based on the federal credit for state estate taxes, so that it wouldn't actually increase the total estate tax bill. When the feds eliminated the credit for the state estate tax, it broke that system, and MA chose to stick with the prior system.