Schedule X Schedule Instructions

2 Taxable IRA/Keogh and Roth IRA

Distributions

Complete the Schedule X, line 2 worksheet on the next page to

calculate the taxable portion of any amount you received as an

Individual Retirement Account (IRA), Keogh or Roth IRA distri-

bution. Since Massachusetts does not allow a deduction for

amounts originally contributed to an IRA or Keogh, the distrib-

utions are not taxable until the full amount of your contribu-

tions which were previously subject to Massachusetts taxes are

recovered.

◗ Contributions made to Keogh accounts prior to 1975 were

deductible when made. Therefore, no deduction may be taken

from a Keogh distribution for amounts contributed before 1975.

Massachusetts generally adopts the federal conversion rules for

partial or complete rollovers from existing IRAs to Roth IRAs.

Generally, the rollover amount is treated as a distribution and

included in federal gross income to the extent it is attributable

to investment growth or previously deducted contributions. In

1998 a special four-tax year averaging rule applied at the election

of the taxpayer on their U.S. return, whereby the taxable por-

tion of the 1998 rollover amount was included in gross income

evenly over four taxable years beginning in 1998. This election

applies for Massachusetts purposes; however, only the portion

previously not subject to Massachusetts taxation will be in-

cluded in Massachusetts gross income evenly over four tax

years. When completing the worksheet, taxpayers who elected

the special four-tax-year averaging rule should include on line 9

the third installment of the taxable 1998 rollover amount. See

TIR 98-8, Massachusetts 1998 Reducing Income Taxes Act, for

further details.

If you have Roth IRA distributions during the four-year-spread

that are treated federally as an accelerated income inclusion

(i.e., a greater proportion of the income is included in an earlier

tax year), you must also treat the distribution as an accelerated

income inclusion for Massachusetts purposes.

Example: Federally, you have $800 of gross income from a

1998 Roth IRA conversion that is included evenly ($200 each

tax year) over four tax years. For Massachusetts purposes, you

will include $400 of gross income ($100 each tax year), be-

cause $400 of the 1998 Roth IRA conversion was attributed to

contributions previously subject to Massachusetts taxation. In

1999 you received additional Roth IRA distributions that for

federal tax purposes resulted in an accelerated income inclusion.

For federal purposes the remaining three tax years will include

$300 in 1999, $200 in 2000 and $100 in 2001. For Massachu-

setts purposes, the remaining tax years will include $150 in

1999, $100 in 2000 and $50 in 2001. In this example, the tax-

payer would enter the $100 taxable amount for tax year 2000 in

line 9 of the worksheet on the next page.

Schedule Instructions

◗ respond to certain DOR notices that you have shared with

the preparer about math errors, offsets and return preparation.

The notices will not be sent to the preparer.

You are not authorizing the paid preparer to receive any refund

check, bind you to anything (including any additional tax liabil-

ity), or otherwise represent you before DOR. If you want to ex-

pand the paid preparer’s authorization, see Form M-2848, Power

of Attorney and Declaration of Representative.

The authorization cannot be revoked. However, the authoriza-

tion will automatically end no later than the due date (without re-

gard to extensions) for filing your 2001 tax return. This is April

16, 2002 for most people.

Mailing

If you are expecting a refund or if you have no tax due, use the

blue envelope that came with this booklet. If you do not have

one, mail Form 1 to:

Massachusetts Department of Revenue

PO Box 7000

Boston, MA 02204-7000

If you have a tax due, use the green envelope that came with

this booklet. If you do not have one, mail Form 1 to:

Massachusetts Department of Revenue

PO Box 7003

Boston, MA 02204-7003

Note: Schedule lines without specific instructions are consid-

ered to be self-explanatory. Be sure to list on each schedule the

name and Social Security number that appears first on Form 1.

Do not cut or separate schedules.

Schedule X

Other Income

Be sure to enclose with Form 1.

1 Alimony Received

Enter in Schedule X, line 1 the total amount of all periodic pay-

ments of alimony or separate maintenance received under a

court judgment or decree, or for excess alimony amounts re-

captured, as reported on U.S. Form 1040, line 11. Payments

specified as child support are not taxable. You must enter in the

space provided the payer’s Social Security number.

Schedule Instructions

3 Massachusetts State Lottery Winnings

Enter in Schedule X, line 3 all winnings from the Massachusetts

state lottery. Do not enter less than “0.” You may only deduct the

price of your winning ticket. Lottery losses are not deductible

under Massachusetts law. Lottery losses claimed as itemized

deductions on U.S. Form 1040, Schedule A are not allowed on

your Massachusetts return.

4 Other Gambling Winnings

Enter in Schedule X, line 4 all gambling winnings from casinos,

raffles, races, beano or other events of chance, wherever held,

and winnings from non-Massachusetts lotteries. Do not enter

less than “0.” You may only deduct the price of the winning

ticket. Gambling losses are not deductible under Massachu-

setts law. Gambling losses claimed as itemized deductions on

U.S. Form 1040, Schedule A are not allowed on your Mass-

achusetts return.

5 Fees and Other 5.85% Income

The following items should be reported on line 5 of Schedule X.

Do not enter less than “0.” Enclose additional statements if

more space is needed.

◗ All fee income, such as payments for jury duty, election

worker payments, director’s fees, compensation received as

executor or administrator of an estate, and commission income

or tips not reported in line 3 of Form 1 are taxable. Also, report

all bartering income not reported on Schedule C (the fair

market value of goods or services received in payment for

your services).

◗ All prizes and awards won in a quiz program, drawing, beauty

contest, etc. are taxable at fair market value. Awards and bonuses

received from your employer for performance of services not

part of a qualified award plan are also taxable.

◗ Other Massachusetts 5.85% income reported on U.S. Form

1040, line 21 and not reported elsewhere in Form 1, lines 3

through 8 or Schedule X, lines 1 through 4 must be reported in

line 5 of Schedule X.

◗ Pre-1996 installment sales classified as ordinary income

for Massachusetts purposes (from Massachusetts Schedule D,

line 9) are taxed as 5.85% income and must be reported on line

5 of Schedule X.

◗ Embezzled or other income from illegal activities is taxable

and should be reported on Schedule X, line 5.

The following items should not be reported on your Massachu-

setts return:

◗ Any “net operating loss” reported as a negative amount on

U.S. Form 1040, line 21 cannot be entered on Schedule X. A net

operating loss from a business or profession cannot be carried

forward or backward to offset individual income in any other

year under Massachusetts law.

Schedule Instructions

Schedule X, Line 2 Worksheet — Taxable IRA/Keogh Plan

and Roth IRA Conversion Distributions

If completing the worksheet to report conventional IRA/Keogh

distributions or Roth IRA conversion distributions, complete

lines 1 through 5, omit lines 6 through 9 and complete line 10.

If completing the worksheet to report Roth IRA conversion dis-

tributions if four-year tax averaging was elected on your 1998 U.S.

tax return, omit lines 1 through 5 and complete lines 6 through 10.

Note: If during 2000 you received a distribution from a Roth IRA

that was treated as an accelerated income inclusion for federal tax

purposes, you must also treat the distribution as an accelerated

income inclusion for Massachusetts purposes. See the example in

the instructions for further details.

If completing the worksheet to report conventional IRA/Keogh

distributions, Roth IRA conversion distributions occurring in 2000

and Roth IRA conversion distributions if four-year tax averaging

was elected on your 1998 U.S. tax return, complete lines 1

through 10.

Roth IRA distributions are taxable in Massachusetts to the extent

they are federally taxable. Report taxable 2000 Roth IRA

distributions on line 10.

Line 1. Total IRA/Keogh plan distributions, Roth IRA

conversion distributions received during 2000. . . . .

Line 2. Total contributions previously

taxed by Massachusetts . . . . . . . . . .

Line 3. Total distributions received

in previous years . . . . . . . . . . . . . . . .

Line 4. Subtract line 3 from line 2. If line 3 is larger

than line 2, enter “0” . . . . . . . . . . . . . . . . . . . . . . . . .

Line 5. Taxable IRA/Keogh distributions. Subtract

line 4 from line 1 and enter the result here. Not less

than “0”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note: Taxpayers who elected on their 1998 U.S. return four-tax-

year averaging for 1998 Roth IRA conversion distributions must

complete lines 6–9 to report the third installment for tax year 2000.

Line 6. Total 1998 Roth IRA conversion distributions if four-year

tax averaging elected on 1998 U.S.

tax return received during 1998 . . . .

Line 7. Amount of contributions in

line 6 that were previously taxed by

Massachusetts. . . . . . . . . . . . . . . . . .

Line 8. Subtract line 7 from line 6.

Not less than “0” . . . . . . . . . . . . . . . .

Line 9. 2000 taxable Roth IRA conversion distributions

if four-year tax averaging elected on your 1998 U.S.

tax return. Divide line 8 by 4 . . . . . . . . . . . . . . . . . . .

Line 10. Total taxable IRA/Keogh distributions, 2000 Roth IRA

conversion distributions, 2000 taxable Roth IRA distributions and

the third installment of four-tax year averaging of 1998 Roth IRA

conversion distributions. Add line 5 and line 9 and

enter the result here and in line 2 on Schedule X . . .

Note: You must complete separate worksheets if married filing

a joint return and both you and your spouse received IRA/Keogh

Plan and/or Roth IRA conversion distributions.

◗ Refunds of U.S. and Massachusetts income taxes are not

considered income under Massachusetts law. If you received

interest on refunds, report such interest on Massachusetts

Schedule B.

6 Total

Add lines 1 through 5 and enter the total in line 6 of Schedule X

and in line 9 of Form 1. Do not enter less than “0.” Be sure to

enclose Schedule X with your return. Failure to do so will delay

the processing of your return.

Schedule Y

Other Deductions

Be sure to enclose with Form 1.

1 Allowable Employee Business Expenses

Generally, reimbursed employee business expenses are not in-

cluded in your wages or salary and therefore are not allowed as

deductions. However, there are unreimbursed and certain reim-

bursed expenses for which you are allowed a deduction. Com-

plete the following worksheet in order to calculate your Mass-

achusetts employee business expense deduction. The expenses

must relate to income reported in lines 3 or 9 on Form 1.

Employees may deduct the following:

◗ unreimbursed travel and transportation expenses including

lodging and meals away from home incurred by an employee;

and

◗ all federally deductible unreimbursed employee business ex-

penses, if the employee is a salesperson who solicits business

for an employer away from the employer’s place of business.

Unreimbursed expenses are only deductible if all of the follow-

ing conditions are met:

◗ you itemize deductions;

◗ you file a joint return in Massachusetts, if you also filed a

joint U.S. return; and

◗ your unreimbursed business expenses taken together with

the other miscellaneous itemized deductions reported on U.S.

Form 1040, Schedule A, lines 20, 21 and 22 exceed 2% of

your federal adjusted gross income reported on U.S. Form

1040, Schedule A, line 25. See the following worksheet for

Schedule Y, line 1.

If you are a qualified performing artist or a fee-basis state or

local government official, do not complete the worksheet. Enter

on Schedule Y, line 5 your federally deductible business ex-

penses included on U.S. Form 1040, line 32 and fill in the ap-

propriate oval in Schedule Y, line 5. On the dotted line next to

line 5, be sure to indicate the type of deduction being taken, as

identified on U.S. Form 1040, line 32. For example, qualified

performing arts-related expenses should be identified as “QPA”

and employee business expenses of fee-basis state or local

government officials should be identified as “FBO.” Enclose U.S.

Form 2106 or 2106-EZ with your return.

Schedule Y, Line 1 — Massachusetts Employee Business

Expense Deduction Worksheet

A. Enter the amount from U.S. Form 2106, line 10,

or 2106-EZ, line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. If you are an employee other than an outside salesperson, add

the amount of unreimbursed expenses included in U.S. Form

2106 or 2106-EZ, line 4 to the amount of unreimbursed meals

and entertainment expenses included in U.S. Form 2106 or

2106-EZ, line 5, except for meals incurred while

away from home. Enter the result here. . . . . . . . . . .

C. If you are an individual with a disability, enter the amount

of impairment-related expenses included in item A

and claimed on line 27 of U.S. Schedule A . . . . . . . .

D. Subtract items B and C from item A, and enter

the result here. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

E. Enter the amount from U.S. Schedule A, line 26

F. Enter the smaller amount of Item D or E here and

on Schedule Y, line 1. . . . . . . . . . . . . . . . . . . . . . . . .

Be sure to enclose U.S. Form 2106 or 2106-EZ with your return.

2 Penalty on Early Savings Withdrawal

If you were charged a penalty because of early withdrawal of

savings, and interest on the savings that such a penalty relates

to is reported on this return or on a prior year Massachusetts

return, you may deduct the penalty. This deduction is the same

as the amount allowable on U.S. Form 1040, line 30. Enter this

amount in line 2 of Schedule Y.

3 Alimony Paid

Enter in Schedule Y, line 3 the total amount that you paid to

your former spouse during 2000 for alimony or separate main-

tenance under court decree, or for excess alimony amounts

recaptured, as reported on U.S. Form 1040, line 31a. Enter

the recipient’s Social Security number in the space provided in

line 3 of Schedule Y.

4 Amounts Excludible Under MGL Ch. 41,

Sec. 111F or U.S. Tax Treaty Included in

Form 1, Line 3.

Massachusetts allows an exclusion from income of amounts re-

ceived by a firefighter or police officer incapacitated in the line of

duty, per MGL Ch. 41, sec. 111F, and an exclusion from income

of amounts received by qualifying students exempt under a

U.S. tax treaty.

Enter any excludible amount of income received while you were

a firefighter or police officer incapacitated in the line of duty in

line 4 of Schedule Y that was included in Form 1, line 3, and fill in

the appropriate oval. Enclose a statement from your employer.

Schedule Instructions

If you were a qualifying student, enter any excludible amount of

income received that was exempt under a U.S. tax treaty in line 4

of Schedule Y that was included in Form 1, line 3, and fill in the

appropriate oval. Enter the country name, the income code

number and the tax treaty article citation in the spaces provided.

Enclose U.S. Form 1042-S.

5 Other Qualified Deductions

You may claim only the deductions listed below for Schedule Y,

line 5. If you are entitled to claim any of the deductions in line 5,

fill in the appropriate oval(s) and enter the total amount of de-

ductions claimed in line 5.

◗ Student Loan Interest Deduction: Enter the amount from

U.S. Form 1040, line 24 or 1040A, line 17 (not to exceed $2,000

for tax year 2000) and fill in the appropriate oval in line 5 of

Schedule Y.

◗ Medical Savings Account (MSA) Deduction: Enter the

amount from U.S. Form 1040, line 25, enclose U.S. Form 8853

and fill in the appropriate oval in line 5 of Schedule Y.

◗ Moving Expenses: Enter the amount from U.S. Form 1040,

line 26, enclose U.S. Form 3903 and fill in the appropriate oval

in line 5 of Schedule Y.

◗ Self-Employed Health Insurance Deduction: Due to differ-

ences between the Internal Revenue Code as amended and in

effect as of January 1, 1998 and the current year, only 50% of

the qualified insurance payments are deductible for Massachu-

setts purposes for the 2000 tax year. As a result, you must

complete a pro forma version of the U.S. Self-Employed Health

Insurance Deduction Worksheet (U.S. Form 1040 instructions)

using .50 (50%) in line 2 of the worksheet. If you used the work-

sheet in IRS Pub. 535, you must complete a pro forma version

using .50 (50%) in line 4 of the worksheet. Enter the result here

and fill in the appropriate oval in line 5 of Schedule Y.

◗ Certain Qualified Deductions from U.S. Form 1040:

Do not include any amounts reported on U.S. Form 1040, lines

23 through 31a that are included in Form 1040, line 32 total.

Enter only amounts included in U.S. Form 1040, line 32 as an

adjustment, except amounts contributed to sec. 501(c)(18)

pension plan and contributions by certain chaplains to sec.

403(b) plans. For Massachusetts purposes, contributions to sec.

501(c)(18) pension plans and contributions by certain chaplains

to sec. 403(b) plans are not deductible. On the dotted line next

to line 5, be sure to indicate the type of deduction being taken,

as identified on U.S. Form 1040, line 32. Identify qualified per-

forming arts-related expenses as “QPA”; jury duty pay given to

your employer as “Jury Pay”; reforestation amortization as

“RFST”; repayment of supplemental unemployment benefits

under the Trade Act of 1974 as “Sub-Pay TRA”; the deduction

for clean-fuel vehicles as “Clean-Fuel”; employee business ex-

penses of fee-basis state or local government officials as “FBO”;

and deductible expenses related to income reported on U.S.

Form 1040, line 21 and Massachusetts Schedule X, line 5 from

the rental of personal property engaged in for profit as “PPR.”

Fill in the appropriate oval in line 5 of Schedule Y.

6 Deductible Qualified Contributory Pension

Income from Another State or Political

Subdivision Included in Form 1, Line 4

Massachusetts allows a deduction for pension income received

from another state or one of its political subdivisions which does

not tax such income from Massachusetts or its political subdi-

visions. For guidelines to determine which state’s pensions are

exempt in Massachusetts, see TIR 95-9. Enter any deductible

amount of such income in line 6 of Schedule Y that was included

in Form 1, line 4. Enter the name of the state or political subdivi-

sion in the space provided in line 6.

7 College Tuition Deduction

A deduction is allowed for tuition payments paid by you, for

yourself or a dependent, to a qualifying two-or four-year college

leading to an undergraduate or associate’s degree, diploma or

certificate. Tuition payments for students pursuing graduate de-

grees at such a college or university are not eligible for the col-

lege tuition deduction. The deduction is equal to the amount by

which the tuition payments, less any scholarships, grants or fi-

nancial aid received, exceeds 25% of Massachusetts adjusted

gross income. Qualified tuition expenses include only those ex-

penses designated as tuition or mandatory fees required for the

enrollment or attendance of the taxpayer or any dependent of

the taxpayer at an eligible educational institution. No deduction

is allowed for any amount paid for room and board, books, sup-

plies, equipment, personal living expenses, meals, lodging, travel

or research, athletic fees, insurance expenses or other expenses

unrelated to an individual’s academic course of instruction.

Complete the Massachusetts AGI Worksheet on page 19 and

the Schedule Y, line 7 worksheet below to see if you may qual-

ify for this deduction. See TIR 97-13 for more information.

Schedule Y, Line 7 Worksheet — College Tuition Deduction

Line 1. Enter total tuition payments paid by you,

for yourself or a dependent, to a qualifying two-

or four-year college in 2000 . . . . . . . . . . . . . . . . . . .

Line 2. Enter amount of scholarships, grants or

financial aid received in 2000 for amounts shown

in line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Line 3. Subtract line 2 from line 1. If “0” or less,

you do not qualify for this deduction . . . . . . . . . . . .

Line 4. Enter amount from line 7 of Massachusetts

AGI Worksheet (page 19) . . . . . . . . . . . . . . . . . . . . .

Line 5. Multiply line 4 by .25. . . . . . . . . . . . . . . . . . .

Line 6. If line 3 is smaller than line 5, you are not

eligible for this deduction. Enter “0.” If line 3 is

larger than line 5, subtract line 5 from line 3 and

enter the result here and in line 7 on Schedule Y . . .

Schedule Instructions

8 Total Other Deductions

Add lines 1 through 7 and enter the total in line 8 of Schedule Y

and on line 15 of Form 1. Be sure to enclose Schedule Y with your

return. Failure to do so will delay the processing of your return.

Schedule Z

Other Credits

Be sure to enclose with Form 1.

1 Part 1 Credits

◗ Lead Paint: If you incurred expenses for covering or removing

lead paint on residential premises in Massachusetts, you may

claim a credit for expenses up to $1,500 for each residential unit.

A seven-year carryover of any unused credits is allowed. Strict

regulations govern who can remove or cover the lead paint. The

basic rules are explained on Massachusetts Schedule LP, Credit

for Removing or Covering Lead Paint on Residential Premises.

If you qualify for the credit, complete and enclose Schedule LP

and fill in the appropriate oval in Part 1.

◗ Economic Opportunity Area Credit: Massachusetts allows a

credit equal to 5% of the cost of qualifying property purchased

for business use within an Economic Opportunity Area (EOA). To

qualify for this credit, the property must be used exclusively in a

certified project in an EOA. A certified project is a project that

has been approved by the Economic Assistance Coordinating

Council (EACC). If you qualify for the credit, complete and en-

close Schedule EOA and fill in the appropriate oval in Part 1.

◗ Full Employment Credit: Every employer who participates in

the Full Employment Program and continues to employ a partic-

ipant for at least one full month after any Full Employment Pro-

gram subsidy for that participant has expired may claim the Full

Employment Credit. A qualified employer may claim a credit

equal to $100 per month of eligible employment per participant,

with a maximum credit of $1,200 per participant. Qualified par-

ticipants and employers are those who participate in the Full

Employment Program under the rules of the Department of Tran-

sitional Assistance (DTA). A five-year carryover of any unused

credit is allowed. If you qualify for this credit, complete and en-

close Massachusetts Schedule FEC, Full Employment Credit,

and fill in the appropriate oval in Part 1.

◗ Septic Credit: An owner of residential property located in

Massachusetts who occupies the property as his or her princi-

pal residence is allowed a credit of a maximum of $1,500 per

taxable year for expenses incurred to comply with the sewer

system requirements of Title V as promulgated by the Depart-

ment of Environmental Protection or to connect to a municipal

sewer system pursuant to a federal court order, consent decree

or similar mandate. The amount of the credit is 40% of the cost,

up to $15,000, for design and construction expenses for repair

or replacement of a failed cesspool or septic system. The max-

imum aggregate amount of the credit is $6,000. A five-year

carryover of any unused credit is allowed. See TIRs 97-12, 98-8

and 99-5 for more information. If you qualify for this credit, com-

plete and enclose Massachusetts Schedule SC, Septic Credit,

and fill in the appropriate oval in Part 1.

◗ Brownfields Credit: Effective for tax years beginning on or

after January 1, 1999, taxpayers are allowed a credit for

amounts expended to rehabilitate contaminated property

owned or leased for business purposes and located within an

economically distressed area. In general, the credit is 25% or

50% of certain environmental response and removal costs in-

curred between August 1, 1998, and January 1, 2007, provided

that the taxpayer commences and diligently pursues an envi-

ronmental response action before August 5, 2003. The credit

that may be taken in any taxable year is limited to 50% of the

taxpayer’s tax liability. A five-year carryforward of unused credit

is allowed, provided the taxpayer continues to maintain the

remedies required by law. For more information, see TIRs 99-13

and 00-9.

Enter the total amount of all credits claimed in Part 1 in Sched-

ule Z, line 1 and complete lines 2 and 3.

2 Part 2 Credits for Residents and Part-Year

Residents Only

◗ Income Tax Paid to Another State: If any of the income re-

ported on this return is subject to taxation in another state or

jurisdiction and you have filed a return and paid taxes in the

other state or jurisdiction, complete the Schedule Z, line 2 work-

sheet on the next page, enclose a copy of your return filed with

another state or jurisdiction and fill in the appropriate oval in

Part 2. Do not include taxes paid to the U.S. government. (This

credit does not apply to city or local taxes.) You are allowed

to claim a credit for taxes paid to the following jurisdictions:

(a) other states in the U.S.; (b) any territory or dependency of

the U.S. (including Puerto Rico, the Virgin Islands, Guam, the

District of Columbia); or (c) the Dominion of Canada or any of

its provinces (less any U.S. credit amount allowable from U.S.

Form 1116).

The total credit which you calculate on this worksheet is the

smaller of the amount of taxes due to other jurisdictions (net of

certain adjustments) or the portion of your Massachusetts tax due

on your gross income that is taxed in such other jurisdictions.

Credit is not given for a property tax due to another jurisdiction

on account of capital stock or property. This does not refer to a

tax on gain or income from the sale of capital stock or property,

as included on Schedule B or D. Credit is also not given for any

interest and penalties paid on a tax due to another jurisdiction.

You must complete separate worksheets if you had 5.85% and

interest income (other than interest from Massachusetts

Schedule Instructions

you qualify for the credit, complete and enclose Massachusetts

Schedule EC, Residential Energy Credit, and fill in the appropri-

ate oval in Part 2.

Enter the total amount of the credits claimed in Part 2 in Sched-

ule Z, line 2. Then, add line 1 and line 2 and enter the result in

Schedule Z, line 3 and in Form 1, line 26.

Schedule E, Part I

Note: If showing a loss, be sure to mark over the “X” in the box

to the left.

Rental, Royalty and REMIC Income or Loss

1a Rental and Royalty Income or Loss

Enter total rental and royalty income or loss included in U.S.

Form 1040, Schedule E, Part I, line 26 and U.S. Schedule E,

Part V, line 39.

1b Real Estate Mortgage Investment Conduit

(REMIC) Income or Loss

Enter total Real Estate Mortgage Investment Conduit (REMIC)

residual income or loss from U.S. Schedule E, Part IV, line 38.

2 Massachusetts Differences

Enter and explain any differences between total rental, royalty

and REMIC income on the U.S. return and the same type of in-

come on your Massachusetts return. Possible differences in-

clude trust provisions, deductible royalties from approved U.S.

energy conservation patents and passive losses as described

below. Explain the differences in the space provided or enclose

an additional sheet if necessary.

Trust Provisions

Enter any rental, royalty or REMIC income or loss shown on

your U.S. return that is taxed on a Massachusetts Fiduciary Re-

turn, Form 2.

Deductible Royalties from U.S. Energy Conservation

Patents

Enter any income you received from certain U.S. patents that

are approved by the Massachusetts Division of Energy Resources

as being useful for energy conservation or for alternative en-

ergy development. Request approval from the Division of Energy

Resources, Attention: General Counsel, 70 Franklin Street, 7th

Floor, Boston, MA 02110, or call (617) 727-4732. Enclose evi-

dence of such approval with your tax return. If such approved

patent income is other than royalty income, use the applicable

schedule and explain.

Passive Losses

As a result of differences in U.S. and Massachusetts rules in

1987, the calculations you made for passive losses on your

Schedule Instructions

banks), dividends or capital gain income taxed by another ju-

risdiction. If you use this worksheet to calculate a credit for in-

terest income (other than interest from Massachusetts banks),

dividends or capital gain income, substitute interest income

(other than interest from Massachusetts banks), dividends or

capital gain income for 5.85% income in line 1. You must also

substitute Schedule B, line 11 (interest and dividend income

and taxable 12% capital gains) or Schedule D, line 12, columns

A, B, C, D and E (gross long-term capital gains and losses), but

not less than “0,” for Form 1, line 10 in line 2 of the worksheet,

and the total of Form 1, line 19b multiplied by .0585 (tax on in-

terest and dividend income) and Form 1, line 21 (12% tax) or

line 22 (tax on long-term capital gains) for Form 1, line 19a in

line 4 of the worksheet.

Note: When using this worksheet to calculate credit for interest

income (other than interest from Mass. banks), dividends or

capital gain income, enter in line 1 such income taxed in another

jurisdiction calculated as if it was earned in Massachusetts.

Schedule Z, Line 2 Worksheet — Income Tax Paid to Another

Jurisdiction

Note: If you have income other than from Form 1, line 10 taxed

by other jurisdictions, see instructions.

Line 1. Enter the total 5.85% income included in

Form 1, line 10 on which you paid taxes to another

jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Line 2. Enter the total of Form 1, line 10 and the total

Massachusetts bank interest or the interest exemption

amount, whichever is smaller, from Form 1, line 5a

or line 5b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Line 3. Divide line 1 by line 2 . . . . . . . . . . . . . . . . . .

Line 4. Multiply Form 1, line 19a by .0585 . . . . . . . .

Line 5. Enter any Limited Income Credit from

Form 1, line 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Line 6. Subtract line 5 from line 4 . . . . . . . . . . . . . .

Line 7. Multiply line 6 by line 3. . . . . . . . . . . . . . . . .

Line 8. Enter the total tax paid to other jurisdictions on income

also reported on this return unless the tax was paid to Canada.

If the tax was paid to Canada, the amount reported in this line

must be reduced by the amount claimed as a foreign tax credit

on U.S. Form 1040, line 43. Credit is only allowable

for amount of tax paid. . . . . . . . . . . . . . . . . . . . . . . .

Line 9. Enter the smaller of lines 7 or 8 here and

on Schedule Z, line 2. . . . . . . . . . . . . . . . . . . . . . . . .

Be sure to enclose copies of other state’s returns with Form 1.

◗ Energy: If you had expenditures for certain renewable energy

source items, such as equipment which uses or transmits solar

or wind energy to heat, cool, or provide hot water for your prin-

cipal residence in Massachusetts, you may qualify for a credit.

Massachusetts does not allow a credit for expenditures on items

such as: insulation, storm or thermal windows or doors, caulk-

ing, weather-stripping, heat pumps (air and water), wood burn-

ing stoves or furnaces, and costs for energy conservation. If