Instructions For Form 8582-Cr - Passive Activity Credit Limitations

Generally, credits from these

performed by individuals and the

participate, report the credits from the

activities are not entered on Form

customers’ use of the rental property

activity on the forms you normally

8582-CR. However, credits from

is incidental to their receipt of the

use.

these activities may be subject to

services.

If the rental activity did not meet

limitations other than the passive

3. Rental of the property is

any of the five exceptions, it is

credit limitation rules.

incidental to a nonrental activity.

generally a passive activity. Special

The rental of property is incidental

rules apply if you conduct the rental

Rental Activities

to an activity of holding property for

activity through a publicly traded

A rental activity is a passive activity

investment if the main purpose of

partnership (PTP). See Publicly

even if you materially participated in

holding the property is to realize a

Traded Partnerships (PTPs), later.

the activity (unless it is a rental real

gain from its appreciation and the

If the rental activity is not

gross rental income is less than 2%

estate activity in which you materially

conducted through a PTP, the

of the smaller of the unadjusted basis

participated and you were a real

passive rental activity is entered in

estate professional).

or the fair market value (FMV) of the

Worksheet 1, 2, 3, or 4.

property.

However, if you meet any of the

Worksheet 1 is for credits (other

five exceptions listed below, the

Unadjusted basis is the cost of the

than rehabilitation credits and

property without regard to

rental of the property is not treated as

low-income housing credits) from

depreciation deductions or any other

a rental activity. See Reporting

passive rental real estate activities in

Credits From the Activities, later, if

basis adjustment described in section

which you actively participated. See

you meet any of the exceptions.

1016.

Special Allowance for Rental Real

An activity is a rental activity if

The rental of property is incidental

Estate Activities, later.

to a trade or business activity if:

tangible property (real or personal) is

Worksheet 2 is for rehabilitation

a. You own an interest in the trade

used by customers or held for use by

credits from passive rental real estate

or business activity during the tax

customers and the gross income (or

activities and low-income housing

expected gross income) from the

year,

credits for property placed in service

activity represents amounts paid (or

b. The rental property was mainly

before 1990. This worksheet is also

used in the trade or business activity

to be paid) mainly for the use of the

used for low-income housing credits

during the tax year or during at least

property. It does not matter whether

from a partnership, S corporation, or

2 of the 5 preceding tax years, and

the use is under a lease, a service

other pass-through entity if your

contract, or some other arrangement.

c. The gross rental income from

interest in the pass-through entity

the property is less than 2% of the

was acquired before 1990, regardless

Exceptions

smaller of the unadjusted basis or the

of the date the property was placed in

An activity is not a rental activity if

FMV of the property.

service.

any of the following exceptions are

Lodging provided for the

Worksheet 3 is for low-income

met.

employer’s convenience to an

housing credits for property placed in

1. The average period of customer

employee or the employee’s spouse

service after 1989 (unless held

use is:

or dependents is incidental to the

through a pass-through entity in

a. 7 days or less, or

activity or activities in which the

which you acquired your interest

b. 30 days or less and significant

employee performs services.

before 1990).

personal services were provided in

4. You customarily make the

Worksheet 4 is for credits from

making the rental property available

rental property available during

passive trade or business activities in

for customer use.

defined business hours for

which you did not materially

Figure the average period of

nonexclusive use by various

participate and passive rental real

customer use for a class of property

customers.

estate activities in which you did not

by dividing the total number of days in

5. You provide property for use in

actively participate (but not

all rental periods by the number of

a nonrental activity of a partnership, S

rehabilitation credits from passive

rentals during the tax year. If the

corporation, or joint venture in your

rental real estate activities or

activity involves renting more than

capacity as an owner of an interest in

low-income housing credits).

one class of property, multiply the

the partnership, S corporation, or joint

average period of customer use of

Special Allowance for

venture.

each class by the ratio of the gross

Rental Real Estate Activities

rental income from that class to the

Reporting Credits

If you actively participated in a

activity’s total gross rental income.

From the Activities

passive rental real estate activity, you

The activity’s average period of

may be able to claim credits from the

customer use equals the sum of

If an activity meets any of the five

activity for the tax attributable to a

these class-by-class average periods

exceptions listed above, it is not a

special allowance of up to $25,000,

rental activity. You must then

weighted by gross income. See

reduced by any passive losses,

determine:

Regulations section 1.469-1(e)(3)(iii).

including the commercial

Significant personal services

1. Whether your rental of the

revitalization deduction, allowed

include only services performed by

property is a trade or business activity

under this exception on Form 8582,

individuals. To determine if personal

(see Trade or Business Activities,

Passive Activity Loss Limitations.

services are significant, all relevant

later) and, if so,

The special allowance also applies

2. Whether you materially

facts and circumstances are

to low-income housing credits and

participated in the activity for the tax

considered. Facts and circumstances

rehabilitation credits from a rental real

include the frequency of the services,

year (see Material Participation,

estate activity, even if you did not

the type and amount of labor required

later).

actively participate in the activity. The

to perform the services, and the value

•

credits allowed under the special

of the services relative to the amount

If the activity is a trade or business

allowance are in addition to the

charged for use of the property.

activity in which you did not materially

credits allowed for the tax attributable

2. Extraordinary personal services

participate, enter the credits from the

to net passive income.

were provided in making the rental

activity on Worksheet 4, later.

•

property available for customer use.

If the activity is a trade or business

The special allowance is not

This applies only if the services are

activity in which you did materially

available if you were married at the

-2-

Instructions for Form 8582-CR (Rev. 01-2012)

Instructions For Form 8582-Cr - Passive Activity Credit Limitations - 2012 Page 2

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