Source: https://www.mass.gov/directive/directive-88-19-loss-on-sale-of-tax-exempt-bonds
Timestamp: 2019-04-18 22:19:43+00:00

Document:
FACTS: Taxpayer Able purchased bonds issued by the Massachusetts Turnpike Authority. When the bonds had declined in value, Able sold them at a loss.
ISSUE: May Able take a loss deduction on the sale of bonds issued by the Massachusetts Turnpike Authority?
DISCUSSION: Under federal law, the gain or loss on the sale of Massachusetts state and local government bonds is taxable. I.R.C. § 61. Under G.L. c. 62, however, the gain or loss on such sales may not be subject to tax.
The Massachusetts statutes enabling state and local authorities to issue bonds often specify the tax treatment of these bonds. The statute authorizing the Massachusetts Turnpike Authority to issue bonds provides that "[the transfer of] the bonds issued under the provisions of this act … shall at all times be free from taxation within the commonwealth." G.L. c. 81, App. § 1-13. To be "free from taxation" means no tax consequences result on the transfer of the bonds; consequently, neither gain nor loss is recognized. See Hampers v. Commissioner of Revenue, A.T.B. No. 132489 (4/30/85).
DIRECTIVE: Since the statute authorizing the Massachusetts Turnpike Authority to issue bonds provides that the transfer of those bonds is free from taxation, Able cannot recognize a loss on the sale.
REFERENCE: G.L. c. 81, App. § 1-13; I.R.C. § 61, Hampers v. Commissioner of Revenue, A.T.B. No. 132489 (4/30/85).

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