Massachusetts K-1 Negative Federal Income but Positive state income

[tomatopotatochilli]

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?

[WSO]

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]

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?