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tomatopotatochilli
Returning Member

Massachusetts K-1 Negative Federal Income but Positive state income

I got a K-1 for Massachusetts with:

 

Federal income in K1 shows loss : -$10k

 

Massachusetts Schedule 3K-1:

Net income or loss from rental real estate activity                                                                     $380

Massachusetts net income for the year                                                                                        $380

PRE-APPORTIONED LT SECTION 1231 GAINS/LOSSES TAXED AT 5.00%                           $278
PRE-APPORTIONED INTEREST (OTHER THAN MA BANK INT.) & DIVIDENDS                     $1

 

Note that my investment is in an entity that further invests in various businesses across US. Which means I got 1 Federal K-1 for all the investments. And various state K-1s as part of the package. The total federal income is thus negative but  Massachusetts source is listed as positive as shown above. 

 

I am a non-resident for Massachusetts and no other income there. 

 

Do I need to file a Massachusetts state return? Given the amount is low does the personal exemption (MFJ) covers it?

2 Replies
WSO
Level 3

Massachusetts K-1 Negative Federal Income but Positive state income

Excellent question!   

I have a very similar situation (non resident investing in real estate in many states via a crowdfunding platform called CrowdStreet and federal K-1's showing a large loss, but MA shows a few hundred dollars of net income.).     

 

The MA filing requirements can be found at https://www.mass.gov/service-details/who-must-file-a-state-personal-income-tax-return.  The personal prorated exemption you cite you make one think that you don't have to file.  It says, "If you are not a Massachusetts resident, filing will generally be required only if your “Massachusetts source income” exceeds either $8,000 or your Massachusetts prorated personal exemption, whichever is less. The 2020 exemption amount is $4,400 for single and $8,800 for married filing jointly..."

 

But when I did the MA state return in TT that small amount resulted in a $9 MA tax obligation.  I am presuming any obligation to MA would make one have to file and pay.  

 

WSO
Level 3

Massachusetts K-1 Negative Federal Income but Positive state income

On the other hand, maybe since our incomes are much less than the MA gross income (sourced) threshold, stop right there and don't calculate or file?

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