6252 - received money in 2006

[Absolut]

I have a client who sold property in MA last year (05) for $307,000.00, I reported this on a 6252, b/c my client held a $30,000.00 note for the buyer, who was suppose to have had paid it in 30 days but it took unitl Sept of 2006 to get it.

She received a check for $30,500.00 ($500.00 is the interest held on the note). She lives in Maine and has right along. She receives a trust from MA but the trust pays all the taxes and is not taxable here in Maine, because it's a MA Trust is my understanding.

So my question is this? The $30,500.00 is this taxable in MA or Maine?

[JCH]

Maine.....

[Absolut]

Thank you

[New York Enrolled Agent]

Perhaps I mis-read the post but I fail to understand why this sale of real property would not be taxable to both states. If I follow the post correctly, this sale of real property has nothing to do with the trust. You say the taxpayer sold the property. Is my assumption correct?

A non-resident of MA who sells real property in MA has MA source income. It seems a non-resident return should be filed for both 2005 and 2006 with MA honoring the federal installment agreement.

Since your taxpayer is a resident, ME would also tax the gain on the sale of property, However, ME will give a resident credit on taxes paid to an other state on income also taxed by ME.

[JCH]

If it were a rental property located in MA or income directly derived from MA I'd agree, but the property is sold, and all that exists is the note. MA has no claim to the income, and you need not inconvenience your client with a non-resident return to file in MA. I'd source the income to the resident state of Maine.

[erchess]

I have to agree with NYEA

because I know that if it were NC instead of MA this is how NC would feel about it. Of course MA/NC is not able to do much unless the taxpayer can be caught in the state, but still .... I would advise her to tax herself on the sale in both states with all available credits.

[New York Enrolled Agent]

If it were a rental property located in MA or income directly derived from MA I'd agree, but the property is sold, and all that exists is the note. MA has no claim to the income, and you need not inconvenience your client with a non-resident return to file in MA. I'd source the income to the resident state of Maine.

Absolut filed FORM 6252 - an Installment Sale - this requires payment in more than ONE tax year. If the sale took place in 2005, then there must be income in an other year - in this case 2006. The 30K was the amount of principal that was not paid in 2005 and was to be paid in 2006. MA (like most states) taxes non-residents on all sales of real property, rental or not, if the property is located in that state. Much more than an inconvenience - it's required.

[JCH]

Absolut filed FORM 6252 - an Installment Sale - this requires payment in more than ONE tax year. If the sale took place in 2005, then there must be income in an other year - in this case 2006. The 30K was the amount of principal that was not paid in 2005 and was to be paid in 2006. MA (like most states) taxes non-residents on all sales of real property, rental or not, if the property is located in that state. Much more than an inconvenience - it's required.

NY do you have a cite on this from MA? Still not buying it completely at this point, even if it is an installment sale.

[S T]

just did one in Calif and Co

I found that I had to do it in Calif and Co, don't know if MA and Maine are different. But don't you look to the source income and report accordingly.

I have had an installment sale in Calif, when the receipient moved to Arizona, and I do both states and use the other state tax credit to offset. Calif wants their share for the now non-resident.

Sandy

[Roland Slugg]

The interest ....

Dear Absolut

Agree with NYEA (and almost always do!). The remaining gain portion of the principal received and reportable in 2006 is taxable by both MA and ME, then ME should allow a credit for the tax paid to MA. (That credit may not be for the full amount of MA tax paid, depending on the two states' respective tax rates).

The $500 of interest, however, is probably reportable only on the woman's ME return ... her state of residence. Since the $30,000 note was an intangible asset, its situs was in ME, not in MA, and should not be taxed by MA. My comments are based on California law, not Massachusetts, but they are probably similar.

[JCH]

Dear Absolut

Agree with NYEA (and almost always do!). The remaining gain portion of the principal received and reportable in 2006 is taxable by both MA and ME, then ME should allow a credit for the tax paid to MA. (That credit may not be for the full amount of MA tax paid, depending on the two states' respective tax rates).

The $500 of interest, however, is probably reportable only on the woman's ME return ... her state of residence. Since the $30,000 note was an intangible asset, its situs was in ME, not in MA, and should not be taxed by MA. My comments are based on California law, not Massachusetts, but they are probably similar.

I agree with this answer. I must have been half brain dead in my original response, and admit I made a mistake in my original reply. The great thing about this board is if you're off, people set you straight in a hurry. There are lots of sharp and experienced practitioners here.