Origin: Ordinarily, for federal income tax purposes, capital gains are taxed at the time appreciated property is transferred to a new owner. However, tax is not imposed on capital assets transferred by reason of the owner's death. Further, the new owner receives the assets with a new basis (i.e. the fair market value of assets at the time of decedent's death) rather than the same "carryover" basis of the decedent. Thus, the amount of appreciation that occurred while the decedent held the asset is never taxed. Massachusetts generally follows the federal rules for purposes of determining taxable capital gains. This conformity allows capital assets to escape the personal income tax to the extent of appreciation occurring prior to the decedent's death, resulting in a state tax expenditure. Comment: See also item 1.106
1.022
1.022 Exemption for Capital Gains at Time of Death
Tax Type
Tax Expenditure
Item Number
Item Name
Description
Origin
FY2022
FY2023
FY2024
FY2025
FY2026
Personal Income Tax
Exclusions from Gross Income
1.022
Exemption for Capital Gains at Time of Death
Ordinarily, for federal income tax purposes, capital gains are taxed at the time appreciated property is transferred to a new owner. However, tax is not imposed on capital assets transferred by reason of the owner's death. Further, the new owner receives the assets with a new basis (i.e. the fair market value of assets at the time of decedent's death) rather than the same "carryover" basis of the decedent. Thus, the amount of appreciation that occurred while the decedent held the asset is never taxed. Massachusetts generally follows the federal rules for purposes of determining taxable capital gains. This conformity allows capital assets to escape the personal income tax to the extent of appreciation occurring prior to the decedent's death, resulting in a state tax expenditure. Comment: See also item <a href="/tax-expenditure-budget/personal-income-tax/deferrals-of-gross-income/1-106">1.106</a>
IRC §§ <a href="https://www.law.cornell.edu/uscode/text/26/1001" target="_blank">1001</a> and <a href="https://www.law.cornell.edu/uscode/text/26/1014" target="_blank">1014</a>
789.4
701.8
766.7
837.6
915.0
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