Commissioner of Revenue v. Franchi

This is an appeal by the Commissioner of Revenue (commissioner), pursuant to G. L. c. 5 8A, § 13 (1994 ed.), from a decision of the Appellate Tax Board (board) granting Anthony A. Franchi and Constance Franchi (taxpayers) applications for abatement of income taxes paid by them in 1988 and 1989. We affirm the board’s decision.

At issue is the Massachusetts tax treatment of income and deductions that arise pursuant to Internal Revenue Code *818(I.R.C.) §§ 469 and 7872,2 which govern debts between a taxpayer and “passthrough entities,” where the taxpayer is a partner whose participation in the…