Flow-Through Entities

In the case of a flow-through entity disposing of property in a transaction receiving installment sale treatment for Massachusetts income tax purposes under 830 CMR 62.63.1(4)(a) and (5)(a), it is the flow-through gain recognized by each partner, shareholder, member or beneficiary of an entity that applies in determining the amount and timing of Massachusetts gain for the entire transaction under 830 CMR 62.63.1(4) and (5). Each individual partner, shareholder, member or beneficiary is separately subject to the election and security requirements under 830 CMR 62.63.1(4), (5) and (11). The Massachusetts apportionment percentage, if any, applicable to the year of an installment sale subject to 830 CMR 62.63.1(4)(a) and (5)(a) applies to all gains recognized by non-residents that are attributable to subsequent installment sale payments. See 830 CMR 62.5A.1(6), Non-Resident Income Tax . Example: A partnership consisting of three partners having identical one-third interests sells Massachusetts real estate and the sale results in $2.1 million of recognized Massachusetts gain in the aggregate. Each partner recognizes $700,000 of Massachusetts gain for purposes of determining the amount and timing of Massachusetts gain for the entire transaction under 830 CMR 62.63.1(4) and (5). Therefore, each partner is separately subject to 830 CMR 62.63.1(5) and the security requirements under 830 CMR 62.63.1(11) do not apply.

(11) Elections; Form of Security

Any taxpayer making an election pursuant to this regulation must do so in the form and manner prescribed by the Commissioner. Any taxpayer filing an election for Massachusetts installment sale treatment under 830 CMR 62.63.1(4)(a) must post security with the Commissioner of such kind and in such amount as the Commissioner may determine necessary to secure payment of the total tax.

REGULATORY AUTHORITY 830 CMR 62.63.1: M.G.L. c. 14, § 6(1); M.G.L. c. 62C, § 3; M.G.L. c. 62, § 63 Date of Promulgation: July 14, 2006

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