Home Posts tagged Liability
Accounting and Tax Planning

What Does It Mean for Estate-tax Liability in Massachusetts?

By Elizabeth Dougal, Esq.


Massachusetts estate-planning clients frequently ask whether they should transfer their vacation property, typically located in Florida or New Hampshire, to a limited liability company. The answer is almost always ‘no.’

Why? Because Massachusetts does not tax out-of-state real estate held individually. However, it does tax out-of-state intangible assets. The transfer of the real estate to a limited liability company would convert that real estate to an intangible asset for purposes of the application of the Massachusetts estate tax.

Elizabeth Dougal

Elizabeth Dougal

Let’s say you are a Massachusetts resident with a vacation condominium in Florida valued at $300,000. You die with $800,000 of other assets in Massachusetts. Massachusetts imposes an estate tax up to 16% on a Massachusetts taxable estate of more than $1 million. Massachusetts does not impose its estate tax on real property held individually outside of Massachusetts. Hence, in this scenario, you would owe no Massachusetts estate tax.

What if you transferred that $300,000 Florida condominium to a limited liability company? You sometimes rent it out and want the limited liability company to decrease any liability exposure. Now, when you die, your Massachusetts estate is $1.1 million, thus subject to Massachusetts estate tax. The transfer of the condominium to the limited liability company converted it to an intangible asset includable for Massachusetts estate tax purposes. You could have managed your risk to limit potential liability through the acquisition of appropriate liability insurance instead of transferring it to a limited liability company.

You might also consider transferring your out-of-state property to an entity for probate avoidance, privacy, or ease of future transferability. For these purposes, the use of a simple ‘living’ or revocable trust might accomplish your goal. Massachusetts cannot impose Massachusetts estate tax on real property located outside of Massachusetts, whether held individually or within an arrangement that is the equivalent of individual ownership. A revocable trust is such an arrangement.

One last caveat on the example involving the Florida condominium mentioned above: Florida has no estate tax. Neither does New Hampshire. You may experience a different outcome in states with an estate tax. You will want to consult an estate tax advisor to determine if the state where the property is located has a higher estate tax rate than Massachusetts. If so, use of a limited liability company or other entity may be warranted.

Still, in general, you want to avoid dying as a Massachusetts resident with an estate over $1 million that includes real estate in a limited liability company, unless the real estate is located in Massachusetts or a state with at least an equivalent estate tax.


Elizabeth Dougal is an attorney with Bulkley Richardson and a member of the firm’s Trusts & Estates department.

Banking and Financial Services

Tax Planning in a Gig Economy

By Ian Coddington


In recent years, we have seen a rise in so-called side hustles and gig work, where individuals take on part-time jobs or project-based work for additional income.

This ‘gig economy’ has been accelerated by the effects of the coronavirus outbreak; Americans are being laid off or have to remain at home or socially distance. Without a primary income source, people have turned to other solutions to pay their bills.

Ventures like DoorDash, Uber, Amazon, and Fiver all offer individuals the ability to earn income by doing work for companies and individuals. However, this does not make up the entire market of gig work.

Ian Coddington

Ian Coddington

“This form is different from your W-2 in that 1099 income is considered self-employment earnings, which is taxed differently than W-2 wages.”

People who sell artwork or wrap Christmas presents, handymen, and movers are all examples of individuals who could earn income on the side. We have seen how some side hustles can turn into profitable ventures, while others just use it to have extra spending money. If you took on additional sources of income during the pandemic, there might be some tax considerations you might not be aware of.


Self-employed Vs. W-2

Unlike a normal employed job where you receive a Form W-2, most gig work will consider workers independent contractors, and issue you a Form 1099. The most common form received for this work was a 1099-MISC, which is now replaced with the new Form 1099-NEC.

If you were paid at least $600 from a business that was not your employer, you can expect one of these forms come tax time. This form is different from your W-2 in that 1099 income is considered self-employment earnings, which is taxed differently than W-2 wages. When you work for an employer, they will withhold a percentage of your wages for taxes. However, when you are self-employed, you are subject to self-employment taxes and might be subject to estimate payments.

Depending on your level of income and other withholdings, one benefit of this is a self-employment tax deduction, where you can deduct what an employer would have paid on your tax return. For delivery drivers, it is important to track your mileage, as you can deduct the allowable mileage expense against your self-employed earnings. If you used a home office for business, you could potentially deduct a portion of your mortgage, utilities, and even repairs to that space. Prior to taking this deduction, you should review the rules closely.


Meet with an Advisor

These benefits sound good, but what if you have unique situations for your side hustle? What if you are paid through cash apps like Venmo or Zelle? Can you deduct the transaction fees paid to payment processors like PayPal or Stripe? What if you receive a Form 1099-K? Questions like these can be answered by an advisor, like a licensed tax preparer. Here is a quick list of things to bring to a meeting with a tax preparer:

• Any W-2s or 1099s received;

• Personal or business bank statements;

• Information on your home office, including square footage;

• Log of mileage; and

• Purchases for the business.

Working a side hustle can be an exciting and hopefully profitable venture; however, it can add complexity to your tax return. Take charge of the additional complexity, gather the required documentation, and minimize your tax liability.


Ian Coddington is an associate at the Holyoke-based accounting firm Meyers Brothers Kalicka, P.C.; (413) 536-8510.