Transition Rules

(a) Installment Sale Treatment for Tax Years Beginning Prior to January 1, 2005 . Under M.G.L. c. 62, § 63, as in effect for installment sales for tax years prior to January 1, 2005, taxpayers who were treated as electing installment sale treatment under section 453 of the Code were not automatically entitled to equivalent treatment under the Massachusetts personal income tax provisions. In order to qualify for installment sale treatment for Massachusetts income tax purposes, taxpayers were required to file a separate Massachusetts installment sale election and were required to post security with the Commissioner if the Massachusetts personal income tax deferred was at least $1,500. Taxpayers who were treated as electing installment sale treatment under section 453 of the Code for tax years beginning prior to January 1, 2005, must continue to apply M.G.L. c. 62, § 63 as in effect for such years to such transactions and must apply the Massachusetts personal income tax rate applicable to the year of the installment sale to all gains attributable to subsequent installment sale payments subject to M.G.L. c. 62, § 2(b)(3), without regard to subsequent statutory changes in the personal income tax rate for M.G.L. c. 62, § 2(b)(3). (b) Gain Already Recognized . A taxpayer with a Massachusetts gain from a transaction treated as an installment sale under section 453 of the Code occurring in a tax year beginning prior to January 1, 2005, who did not elect installment sale treatment for Massachusetts purposes but who did not elect out of federal installment sale treatment, will not have to recognize gain that has already been recognized for Massachusetts income tax purposes when such gain is later recognized federally on a deferred basis under the installment method. (c) Security Requirement s. A taxpayer required to post security with respect to transactions occurring in a tax year beginning prior to January 1, 2005 must continue to adhere to the prior security requirements. Such requirements are unaffected by the new $1 million Massachusetts gain threshold.

(4) Massachusetts Gain At Least $1 Million

(a) Federal Election In; Massachusetts Election In; Security . Taxpayers who are treated as electing installment sale treatment for federal income tax purposes under section 453 of the Code, and who wish to receive installment sale treatment for Massachusetts income tax purposes, must file a separate Massachusetts installment sale election if their Massachusetts gain for the entire transaction is equal to or greater than $1 million. Taxpayers with more than one such installment transaction (each giving rise to Massachusetts gain equal to or greater than $1 million) in a given tax year must elect or choose not to elect under this section for all such transactions as a group. Taxpayers filing such election must post security with the Commissioner as provided for in 830 CMR 62.63.1(11). (b) Federal Election In; Massachusetts Election Out . Taxpayers who are treated as electing installment sale treatment for federal income tax purposes under section 453 of the Code may file an election out of Massachusetts installment sale treatment if their Massachusetts gain for the entire transaction is equal to or greater than $1 million. If no election is made under 830 CMR 62.63.1(4)(a) above (along with the requisite posting of security), a taxpayer will be considered to have elected out of Massachusetts installment sale treatment. (c) Federal Election Out; Automatic Massachusetts Election Out . Taxpayers who elect out of installment sale treatment for federal income tax purposes under section 453 of the Code are automatically treated as electing out of Massachusetts installment sales treatment. Such taxpayers are not allowed to elect Massachusetts installment sales treatment.

(5) Massachusetts Gain Less Than $1 Million

(a) Federal Election In; Automatic Massachusetts Election In . Taxpayers who are treated as electing installment sale treatment for federal income tax purposes under section 453 of the Code are automatically treated as electing Massachusetts installment sales treatment if their Massachusetts gain for the entire transaction is less than $1 million. Such taxpayers are not allowed to elect out of Massachusetts installment sales treatment. (b) Federal Election Out; Automatic Massachusetts Out . Taxpayers who elect out of installment sale treatment for federal income tax purposes under section 453 of the Code are automatically treated as electing out of Massachusetts installment sales treatment. Such taxpayers are not allowed to elect Massachusetts installment sales treatment.