Count Form 4797 gains and losses on Massachusetts Schedule D

changelog.d/ma-form-4797-schedule-d.fixed.md

@@ -0,0 +1 @@
+Count Form 4797 gains and losses on Massachusetts Schedule D (Part C) instead of Part B.

policyengine_us/tests/policy/baseline/gov/states/ma/tax/income/gross_income/ma_long_term_capital_gains.yaml

@@ -0,0 +1,158 @@
+# Form 4797, Part II gains and losses (other_net_gain) go on Massachusetts
+# Schedule D, line 7, not on Form 1, lines 3 through 10 (Part B). Expected
+# values are computed line by line from the 2023 Form 1, Schedule B and
+# Schedule D. A single filer with 60,000 of wages and no other 5.0% income
+# has Part B taxable income of 60,000 - 2,000 (Form 1, line 11a) - 4,400
+# (line 18) = 53,600 (line 19), taxed at 5% = 2,680.
+
+- name: Long-term amounts on Schedule D add long-term gains, distributions and Form 4797 amounts
+  period: 2023
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 40
+        long_term_capital_gains: 4_000
+        non_sch_d_capital_gains: 1_000
+    tax_units:
+      tax_unit:
+        members: [head]
+        other_net_gain: -2_000
+    households:
+      household:
+        members: [head]
+        state_code: MA
+  output:
+    # Schedule D: line 1 = 4,000; line 6 = 1,000; line 7 = -2,000.
+    ma_long_term_capital_gains: 3_000
+
+- name: A Form 4797 gain is Part C income
+  period: 2023
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 40
+        employment_income: 60_000
+    tax_units:
+      tax_unit:
+        members: [head]
+        other_net_gain: 5_000
+    households:
+      household:
+        members: [head]
+        state_code: MA
+  output:
+    # Form 1, line 10 = line 3 = 60,000.
+    ma_part_b_gross_income: 60_000
+    # Schedule D, line 7 = 5,000 = lines 9, 13, 15, 17, 19 and 21.
+    ma_part_c_gross_income: 5_000
+    ma_part_c_agi: 5_000
+    # 2,680 + 5% x 5,000.
+    ma_income_tax_before_credits: 2_930
+
+- name: A short-term loss offsets a Form 4797 gain in Part C
+  period: 2023
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 40
+        employment_income: 60_000
+        short_term_capital_gains: -2_000
+    tax_units:
+      tax_unit:
+        members: [head]
+        other_net_gain: 5_000
+    households:
+      household:
+        members: [head]
+        state_code: MA
+  output:
+    ma_part_b_gross_income: 60_000
+    # Schedule B: line 19c = -2,000; line 20 = 0 (line 9 is 0); line 21
+    # = -2,000; line 22 = Schedule D, line 14 = min(2,000, 5,000) = 2,000.
+    # Schedule D, line 15 = 5,000 - 2,000 = 3,000.
+    ma_part_c_agi: 3_000
+    # 2,680 + 5% x 3,000.
+    ma_income_tax_before_credits: 2_830
+
+- name: A Form 4797 loss offsets long-term gains on Schedule D
+  period: 2023
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 40
+        employment_income: 60_000
+        long_term_capital_gains: 5_000
+    tax_units:
+      tax_unit:
+        members: [head]
+        other_net_gain: -3_000
+    households:
+      household:
+        members: [head]
+        state_code: MA
+  output:
+    ma_part_b_gross_income: 60_000
+    # Schedule D: line 1 = 5,000; line 7 = -3,000; line 9 = 2,000 = line 13
+    # = line 15 = line 21.
+    ma_part_c_agi: 2_000
+    # 2,680 + 5% x 2,000.
+    ma_income_tax_before_credits: 2_780
+
+- name: A Form 4797 loss offsets short-term gains on Schedule B, line 25
+  period: 2023
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 40
+        employment_income: 60_000
+        short_term_capital_gains: 3_000
+    tax_units:
+      tax_unit:
+        members: [head]
+        other_net_gain: -1_000
+    households:
+      household:
+        members: [head]
+        state_code: MA
+  output:
+    ma_part_b_gross_income: 60_000
+    # Schedule D, line 13 = line 7 = -1,000; line 14 = Schedule B, line 25
+    # = min(1,000, 3,000) = 1,000; line 15 = 0. Schedule B, line 26
+    # = 3,000 - 1,000 = 2,000 = line 28 = line 39.
+    ma_part_a_agi: 2_000
+    ma_part_a_taxable_capital_gains_income: 2_000
+    ma_part_c_agi: 0
+    # 2,680 + 8.5% x 2,000.
+    ma_income_tax_before_credits: 2_850
+
+- name: A Form 4797 loss applies against dividends on Schedule B, line 32
+  period: 2023
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 40
+        employment_income: 60_000
+        non_qualified_dividend_income: 1_000
+    tax_units:
+      tax_unit:
+        members: [head]
+        other_net_gain: -3_000
+    households:
+      household:
+        members: [head]
+        state_code: MA
+  output:
+    ma_part_b_gross_income: 60_000
+    # Schedule D, line 13 = -3,000; Schedule B, line 24 = 0, so line 14 = 0
+    # and line 15 = -3,000. Line 32 worksheet: line 2 = min(1,000, 2,000)
+    # = 1,000; line 4 = 1,000; line 5 = 3,000; line 6 = 1,000. Schedule B,
+    # line 33 = 1,000 - 1,000 = 0 = line 35. Schedule D, line 17 = -3,000
+    # + 1,000 = -2,000 is carried over (line 23).
+    ma_part_a_agi: 0
+    ma_part_c_agi: 0

policyengine_us/variables/gov/states/ma/tax/income/adjusted_gross_income/ma_long_term_loss_against_dividends.py

@@ -23,11 +23,10 @@ class ma_long_term_loss_against_dividends(Variable):
     def formula(tax_unit, period, parameters):
         short_term_capital_gains = add(tax_unit, period, ["short_term_capital_gains"])
         nonnegative_short_term_capital_gains = max_(0, short_term_capital_gains)
-        # Massachusetts Schedule D, line 13 includes capital gain
-        # distributions reported without a federal Schedule D (line 6).
-        long_term_capital_gains = add(
-            tax_unit, period, ["long_term_capital_gains", "non_sch_d_capital_gains"]
-        )
+        # Massachusetts Schedule D, line 13: long-term gains and losses,
+        # capital gain distributions without a federal Schedule D (line 6)
+        # and Form 4797, Part II (line 7).
+        long_term_capital_gains = tax_unit("ma_long_term_capital_gains", period)
         long_term_capital_loss = max_(0, -long_term_capital_gains)
         # Schedule B, line 25: long-term losses first offset short-term gains.
         remaining_long_term_loss = max_(

policyengine_us/variables/gov/states/ma/tax/income/adjusted_gross_income/ma_part_a_agi.py

@@ -14,11 +14,10 @@ def formula(tax_unit, period, parameters):
         part_a_gross_income = tax_unit("ma_part_a_gross_income", period)
         short_term_capital_gains = add(tax_unit, period, ["short_term_capital_gains"])
         nonnegative_short_term_capital_gains = max_(0, short_term_capital_gains)
-        # Massachusetts Schedule D, line 13 includes capital gain
-        # distributions reported without a federal Schedule D (line 6).
-        long_term_capital_gains = add(
-            tax_unit, period, ["long_term_capital_gains", "non_sch_d_capital_gains"]
-        )
+        # Massachusetts Schedule D, line 13: long-term gains and losses,
+        # capital gain distributions without a federal Schedule D (line 6)
+        # and Form 4797, Part II (line 7).
+        long_term_capital_gains = tax_unit("ma_long_term_capital_gains", period)
         long_term_capital_loss = max_(0, -long_term_capital_gains)
 
         long_term_loss_against_short_term_gain = min_(

policyengine_us/variables/gov/states/ma/tax/income/adjusted_gross_income/ma_part_c_agi.py

@@ -24,9 +24,8 @@ def formula(tax_unit, period, parameters):
             "ma_short_term_loss_against_dividends", period
         )
         remaining_short_term_loss = short_term_capital_loss - loss_against_dividends
-        # Massachusetts Schedule D, line 13 includes capital gain
-        # distributions reported without a federal Schedule D (line 6).
-        long_term_capital_gains = add(
-            tax_unit, period, ["long_term_capital_gains", "non_sch_d_capital_gains"]
-        )
+        # Massachusetts Schedule D, line 13: long-term gains and losses,
+        # capital gain distributions without a federal Schedule D (line 6)
+        # and Form 4797, Part II (line 7).
+        long_term_capital_gains = tax_unit("ma_long_term_capital_gains", period)
         return max_(0, long_term_capital_gains - remaining_short_term_loss)

policyengine_us/variables/gov/states/ma/tax/income/gross_income/ma_long_term_capital_gains.py

@@ -0,0 +1,27 @@
+from policyengine_us.model_api import *
+
+
+class ma_long_term_capital_gains(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "MA long-term capital gains and losses"
+    documentation = (
+        "Long-term amounts on Massachusetts Schedule D: long-term capital "
+        "gains and losses, capital gain distributions reported without a "
+        "federal Schedule D (line 6) and Form 4797, Part II gains and losses "
+        "(line 7). PolicyEngine has a single Form 4797 input, so it also "
+        "counts any gain or loss on business property held one year or less, "
+        "which belongs on Schedule B, lines 12 and 17."
+    )
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        "https://taxsim.nber.org/historical_state_tax_forms/MA/2023/dor-2023-inc-sch-d-(form-1).pdf",
+        "https://taxsim.nber.org/historical_state_tax_forms/MA/2023/dor-2023-inc-form1-instructions.pdf#page=27",
+    )
+    defined_for = StateCode.MA
+    adds = [
+        "long_term_capital_gains",
+        "non_sch_d_capital_gains",
+        "other_net_gain",
+    ]

policyengine_us/variables/gov/states/ma/tax/income/gross_income/ma_part_b_gross_income.py

@@ -7,7 +7,10 @@ class ma_part_b_gross_income(Variable):
     label = "MA Part B gross income"
     unit = USD
     definition_period = YEAR
-    reference = "https://www.mass.gov/info-details/mass-general-laws-c62-ss-2"
+    reference = (
+        "https://www.mass.gov/info-details/mass-general-laws-c62-ss-2",
+        "https://taxsim.nber.org/historical_state_tax_forms/MA/2023/dor-2023-inc-form1-instructions.pdf#page=27",
+    )
     defined_for = StateCode.MA
 
     def formula(tax_unit, period, parameters):
@@ -25,9 +28,16 @@ def formula(tax_unit, period, parameters):
         dividends = max_(0, person("dividend_income", period))
         capital_gains = max_(0, person("capital_gains", period))
         # Capital gain distributions reported without a federal Schedule D
-        # go on Massachusetts Schedule D, line 6.
+        # go on Massachusetts Schedule D, line 6, and Form 4797, Part II
+        # gains on line 7. other_net_gain_gross_income is already the
+        # filers' positive share.
         distributions = max_(0, person("non_sch_d_capital_gains", period))
-        part_a_and_c_income = tax_unit.sum(
-            where(is_dependent, 0, dividends + capital_gains + distributions)
+        form_4797_gains = person("other_net_gain_gross_income", period)
+        filer_dividends_and_gains = tax_unit.sum(
+            where(
+                is_dependent,
+                0,
+                dividends + capital_gains + distributions + form_4797_gains,
+            )
         )
-        return max_(0, ma_gross_income - part_a_and_c_income)
+        return max_(0, ma_gross_income - filer_dividends_and_gains)

policyengine_us/variables/gov/states/ma/tax/income/gross_income/ma_part_c_gross_income.py

@@ -7,15 +7,15 @@ class ma_part_c_gross_income(Variable):
     label = "MA Part C gross income"
     unit = USD
     definition_period = YEAR
-    reference = "https://www.mass.gov/info-details/mass-general-laws-c62-ss-2"  # (b)(3)
+    reference = (
+        "https://www.mass.gov/info-details/mass-general-laws-c62-ss-2",  # (b)(3)
+        "https://taxsim.nber.org/historical_state_tax_forms/MA/2023/dor-2023-inc-form1-instructions.pdf#page=27",
+    )
     defined_for = StateCode.MA
 
     def formula(tax_unit, period, parameters):
-        # Long-term capital gains, with capital gain distributions reported
-        # without a federal Schedule D (Massachusetts Schedule D, line 6)
-        ltcg = add(
-            tax_unit, period, ["long_term_capital_gains", "non_sch_d_capital_gains"]
-        )
+        # Long-term amounts on Massachusetts Schedule D
+        ltcg = tax_unit("ma_long_term_capital_gains", period)
         # Short-term capital gains (can be negative)
         stcg = add(tax_unit, period, ["short_term_capital_gains"])
         # Per MA Schedule B line 22, short-term losses offset long-term gains