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Posted by Rich Carreiro on April 17, 2006, 12:34 pm
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> The Massachusetts DOR says that short-term capital gains are
> taxed at 12%, but TaxCut says they are taxed at 5.3%. Is
> TaxCut wrong, or am I misunderstanding the DOR? The
MA absolutely taxes short-term gains at 12%.
My question is are you sure you are properly reading the
forms TaxCut is showing you and/or are properly
understanding what is and is not a short-term gain?
> instructions for Form 1-ES say "12% income includes
> short-term capital gains, long-term capital gains on
> collecitbles...". Does it really mean short and long term
> gains on collectibles?
Yes, it really means that. All short-term gains are taxed
at 12%, as are long-term gains on collectibles.
> It seems to say that short-term gains from mutual funds are
> taxed at 12%, but TaxCut says that all short term capital gains
> are taxed at 5.3%.
Exactly what do you mean by "short-term gains from mutual
funds"? If you mean short-term gains from YOU selling YOUR
shares of the mutual fund, then yes, they are taxed at 12%.
If you mean short-term gains realized by the FUND from sales
of ITS holdings, those aren't short-term gains. By both
federal and state tax law, they lose any capital character
and become unqualified ordinary dividends (which, among
other things, means they can't be directly offset by capital
losses). As such, MA taxes them at 5.3% like all other
dividends.
All short-term gains which actually are short-term gains
should be reported on MA Sched B in the appropriate places
and they will eventually flow to the "Total 12% income" line
on page two of Form 1.
--
Rich Carreiro rlcarr@animato.arlington.ma.us
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