Rental Property for Non Resident

[Gary]

Some states require a non-resident of that state to file a state return if they have a rental property, even though there is a net loss. Is Massachusetts one of those states? The way I read the All-States book, Massachusetts Gross Income is similar to Federal Gross Income. Thus, if there is a loss on the rental property, there would be no positive gross income in Massachusetts.

[Gary2]

See the last example at http://www.mass.gov/dor/individuals/...ml#Nonresident, and then complain to the MA DOR about their inconsistent terminology.

[New York Enrolled Agent]

The way I read the All-States book, Massachusetts Gross Income is similar to Federal Gross Income. Thus, if there is a loss on the rental property, there would be no positive gross income in Massachusetts.

I don't believe your conclusion is valid. The net gain or loss on rental property does not constitute gross income. The gross rents received constitute gross income. See Reg §1.61-8.

Thus if a taxpayer has sufficent gross income (i.e. the rents received) they have an obligation to file a non-resident return whether there is a net gain or loss from the rental activity.

[Roland Slugg]

In most cases, and perhaps all, it is a good idea to file a state return in any state where the taxpayer owns rental property ... especially if he has a loss. That's because many states have adopted PAL limitation rules similar to the federal ones. When rental property is sold, it usually results in a realized and recognized gain, and all prior year suspended losses are then released, at least for that property. That, in turn, will lower the amount of taxable gain in the year of sale, not only for federal tax purposes but for the state in which the property is located as well. The "loss year" returns, then, serve to put the loss on record in the state(s) where property is located.

[Gary]

Thanks

The example says

"Massachusetts gross income, net rental loss

= ($5,000) considered 0". This is what I assumed before i saw this example which then says

"Since Massachusetts gross income of $16,000 exceeds the pro-rated personal exemption of $0, the nonresident taxpayer is required to file a return."

This certainly seems contradictory to me, but I will prepare a MA return.