G. L. c. 62, §§ 13, 14]

Applications of Foregoing Provisions to Other Fiduciaries

SECTION 13. Sections ten to twelve, inclusive, shall, so far as apt, apply to executors, administrators, guardians, conservators, trustees in bankruptcy, receivers and assignees for the benefit of creditors, to the income received by them and to their beneficiaries; except that clauses (a), (b), (c) and (d) of section ten authorizing certain deductions, shall apply only to trustees and guardians.

The provisions as to the taxation of trust property are by this section extended to fiduciaries other than trustees and it has been ruled by the commissioner that the section applies to receivers of absentees and to natural guardians of minors. Guardians and conservators and receivers of absentees may claim on behalf of the beneficiary any exemption to which he is entitled. A public administrator of the estate of a deceased person leaving no known heirs need make no return of income; and the trustee, assignee or receiver of a corporation or of a trust with transferable shares which has not filed the agreement to pay taxes, is not subject to the income tax; but the receiver of a foreign corporation who has been appointed by a court of this commonwealth to hold a fund for the benefit of Massachusetts creditors is subject to the income tax. Receivers and trustees in bankruptcy of individual debtors are taxable on income to the extent that such income has accrued for the benefit of Massachusetts creditors, the creditors being deemed the beneficiaries of the trust.

Corporations Acting as Trustees

SECTION 14. Corporations acting as trustee or in any other fiduciary capacity shall, with respect to the income received by them in that capacity, be subject to this chapter in the same manner and under the same conditions as individual inhabitants of the commonwealth acting in similar capacities, except that no such corporation shall be taxed on account of any property the income of which would be taxable under section one if received by an individual inhabitant, or an account of the income derived from such property, if such property is held by such corporation as mortgagee or pledgee to secure the payment of bonds, notes or other evidences of indebtedness the interest on which is taxable under section one to such individual

[G. L. c. 62, §§ 14, 17 inhabitants of the commonwealth as receive it, or the principal of which is exempt from taxation under laws other than this chapter.

SECTION 15. Every corporation liable to taxation under the preceding section shall make the returns, and be subject to the penalties, prescribed by this chapter.

This is the only provision for the taxation of corporations in the chapter and of course this provision does not affect property in which a corporation has a beneficial interest, but merely puts trust companies and other corporations acting in a fiduciary capacity upon the same basis as individual trustees with respect to the taxation of trust property. Under the original income tax act this section applied only to corporations authorized by law to act as trustee, but in the consolidation of the General Laws it was amended to include all corporations acting as trustee, so that a corporation acting as trustee without authority would not on that account escape taxation.1

Settlement of Taxes on Fiduciaries

SECTION 16. For the purpose of facilitating the settlement and distribution of estates held by trustees and the other fiduciaries named in section thirteen, the commissioner, with the approval of the attorney general, may on behalf of the commonwealth agree on the amount of taxes at any time due or to become due from such estates under this chapter, and payment in accordance with such agreement shall be full satisfaction of the taxes to which the agreement relates.

Partnerships

SECTION 17. Partnerships having a usual place of business in the commonwealth, any member of which is an inhabitant thereof, shall be subject to the taxes imposed by this chapter. If any of the members of the partnership are not inhabitants of the commonwealth, only so much of the income thereof as is proportionate to the aggregate interest of the partners who are inhabitants of the commonwealth in the profits of the partnership shall be taxed. The tax shall be assessed on such a partnership by the name under which it does business, and the partners shall not be taxed with respect to the income derived by them from such a partnership.

'St. 1918, c. 257, §67.

G. L. c. 62, § 17]

This provision differs from the federal income tax law in that when a partnership has a place of business in this commonwealth and so can be subjected to its laws, the partnership is treated as an entity and taxed on its income and the partners do not pay a tax on their income from the partnership. The taxability of the income of a partnership does not, however, depend upon the location of its place or places of business but upon the domicile of the partners, and a partnership composed of non-residents may have its place of business in this commonwealth without paying any tax here except upon its tangible property, just as an individual non-resident may.

A partnership is subject to the different taxes imposed under this chapter in the same manner as an individual, and if it receives income from taxable intangibles or makes gains from the sale of intangible property, it is taxable on such income at six per cent or three per cent respectively. If the partnership is dissolved during the year, the partners must include all partnership income received up to the time of dissolution, separating the income from taxable intangibles from gain from the sale of intangibles and from business income.

Loans by a partner to a partnership are recognized as valid; the interest thereon may be deducted as a partnership expense and is taxable to the partner receiving it in the same manner as other interest; whereas so-called "partner's capital," contributed under an arrangement by which each partner is to receive interest on the capital invested by him in the business before any profits are divided, is not considered a loan, and the payment of interest thereon is treated as a distribution of profits.

Clubs, associations, labor unions and similar bodies and fraternal, benevolent or charitable organizations which are not incorporated and which are not exempted from taxation by any provision of law, are treated as partnerships by the income tax division and taxed as such on what income they may have from taxable securities or otherwise, with a proportionate deduction on account of members who are not residents of Massachusetts. While this ruling may not be technically correct it is not likely to be questioned because of the inconvenience which would result if it were overthrown, and each member taxed individually for his proportion of the income of the association.

A partnership having a usual place of business in this

[G. L. c. 62, §§ 17, 18 commonwealth at any time between January 1 and June 30 in any year, if its total income from all sources in the preceding year was in excess of two thousand dollars, or if it received any income in that year from taxable intangibles or profit for the year in buying and selling intangible property, is bound to file a return.

Establishment of Partners' Exemptions

SECTION 18. A partnership, in computing its taxable income, may deduct at the request of any partner the whole or any part of the amount of the exemptions to which such partner may be entitled under sections five and eight and of the deduction for family to which he may be entitled under clause (h) of section six; provided the commissioner is satisfied by an affidavit from the partner for whose benefit any such exemption or deduction is claimed, or otherwise, that such partner is not allowed, in all partnerships in which he may be a partner and on account of all income on which he is liable to taxation under this chapter, more than the total amount of such exemptions and deductions to which he is entitled. Each amount so deducted shall be set forth in the return of the partnership, and the partner requesting the same shall be allowed no further exemption or deduction on account thereof. The commissioner, in his discretion, may excuse a partnership which has a place of business in the commonwealth from filing a return under this chapter, if its principal place of business is not within the commonwealth, and in such case may require the partners who are inhabitants of the commonwealth to include in their individual returns their shares of the partnership income, and may assess to each partner individually a tax on his share.

No partnership can claim on account of any partner a greater exemption than such partner's share of the income. Thus, if the total net business income of a partnership composed of three unmarried men without dependent parents and without other income was $5000, if each partner had an equal share in the business the whole income of the partnership would be exempt; but if one had a three-fifths interest and the others a one-fifth interest apiece, the partnership would be taxable on $1000.

A partner having a business income apart from the partnership may apportion his exemption between his private income and the income of the partnership, as he deems advisable.

G. L. c. 62, §§ 19-21]

Resident Members of Partnerships Having No Place of Business in Massachusetts

SECTION 19. An inhabitant of the commonwealth who is a member of a partnership having no usual place of business in the commonwealth, who receives income from such partnership derived from such a source that it would be taxable if received directly by such partner, shall as to such income be subject to the taxes imposed by this chapter.

Under this statute a resident of this commonwealth who is a member of a partnership which has no usual place of business in this commonwealth is obliged to include the income which he receives from the partnership in his individual return, separating the income from taxable intangibles from gains from the sale of intangibles and from business income but not being obliged to give the details as to business income which a partnership itself is obliged to return. In some cases the commissioner allows a partnership having a usual but not its principal place of business in this commonwealth to file no return, on condition. that the resident members of the partnership include such income in their individual returns.

Procedural Provisions Applicable to Partnerships

SECTION 20. The provisions of this chapter in respect to the filing of returns, and the assessment, abatement and collection of taxes, and to notices concerning the same, shall apply to partnerships subject to taxation under this chapter.

Partnerships with Transferable Shares

SECTION 21. Sections seventeen to twenty, inclusive, shall not apply to partnerships, associations or trusts, the beneficial interest in which is represented by transferable shares, and nothing in said sections shall affect other provisions of this chapter so far as the same relate to such partnerships, associations or trusts, the beneficial interest in which is represented by transferable shares.

The distinction is carefully drawn throughout the chapter between ordinary partnerships on the one hand, which involve