A client had Cancellation of Debt Income under a Form 1099-A on a 2007 return. On the Federal return, the income was mitigated by the ability to take a capital loss on the disposition of the property. On the Massachusetts side, however, I found an inability for the same beneficial result. Any loss on the disposition of the property was allowed as a loss carried to the following year, which resulted in a large tax and liability. Anyone know of a way to take the loss on the state?