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Appeals court weighs tax reach over sale of startup stock by nonresident founder
Summary
The court considered whether capital gain from sale of stock in AcadiaSoft by Craig Welch, who left Massachusetts before sale, is taxable to Massachusetts under the expanded definition of Massachusetts‑source income in G.L. c. 62, § 5(a) and related Department of Revenue regulation.
The Appeals Court heard argument in 2024P109, Craig H. Welch and another v. Commissioner of Revenue, over whether a nonresident’s gain on the sale of stock in a Massachusetts company is taxable in the Commonwealth. The central legal question is whether the gain was “effectively connected” with the taxpayer’s trade or business in Massachusetts or was compensatory in nature, bringing it within the statutory sourcing rule in G.L. c. 62, § 5(a).
Counsel for the appellants, Michael Bowen, said Mr. Welch received the stock as part of forming AcadiaSoft in 2005 and later sold the shares as a nonresident in 2015. Bowen emphasized that the gain was…
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