MA rental losses

[joanmcq]

Client had MA rentals as a nonresident for years, never had income. Sold one property this year at a huge gain. Are there any carry forward losses available to deduct against the income now?  Losses were deductible for fed & home state, but never paid any MA tax. Or does MA compartmentalize types of income?

[Lion EA]

A MA loss carry forward could be used on the MA return for the year of a complete taxable disposition of the property.  But, it sounds like she doesn't have a MA loss carry forward on her MA returns, no MA returns.  You could file MA returns now....

[joanmcq]

Client has filed MA returns with the rental losses and losses are showing on the return, but not netting against the capital gain. The losses are from the property that was sold. Am I missing a checkbox on the MA return somewhere?  

[Catherine]

6 hours ago, joanmcq said:

not netting against the capital gain

They are different types of taxable income in MA>

Carryover losses from prior years' rental will show up on Line 23 of MA Sch E-1, then carry to Line 21 of MA Sch E.  Offset is to 5.15% tax income on Form 1 NOT to capital gain income.

Gain on sale of property shows up on MA Sch D and is long term gain so 12% tax.

Two classes of income; tax calculated separately.   

[joanmcq]

I thought that was what was happening. At least he gets a big credit towards his NY tax.