Instructions For Form 8582-Cr - Passive Activity Credit Limitations

videotapes; farming; leasing section

income tax return for the first tax year

PACs that are not used to increase

1245 property; or exploring for (or

in which two or more activities are

the basis of the credit property are

exploiting) oil and gas resources or

originally grouped into a single

carried forward until they are allowed.

geothermal deposits.

activity. The statement must provide

To make the election, complete Form

the names, addresses, and employer

8582-CR, Part VI. No basis

Activities conducted through

identification numbers (EINs), if

adjustment may be elected on a

partnerships, S corporations, and

applicable, for the activities being

partial disposition of your interest in a

C corporations subject to section

grouped as a single activity. In

passive activity.

469. Once a partnership or

addition, the statement must contain

Example of How To

corporation determines its activities

a declaration that the grouped

under these rules, a partner or

Complete Form 8582-CR

activities make up an appropriate

shareholder may use these rules to

economic unit for the measurement of

Note. For tax years beginning after

group those activities with:

gain or loss under the passive activity

2011, line numbers on the referenced

•

Each other,

rules.

forms may change. See the form

•

Activities conducted directly by the

instructions for the referenced forms

Addition to an existing grouping.

partner or shareholder, or

on how to report the passive activity

•

You must file a written statement with

Activities conducted through other

credit.

your original income tax return for the

partnerships and corporations.

tax year in which you add a new

In 2011, John Jones purchased an

A partner or shareholder may not

activity to an existing group. The

interest as a limited partner in

treat as separate activities those

statement must provide the name,

Partnership A (which was an eligible

activities grouped together by the

address, and EIN, if applicable, for

small business). Mr. Jones is married

partnership or corporation.

the activity that is being added and

and files a joint return. During 2011,

Partial disposition of an activity.

for the activities in the existing group.

the partnership placed in service a

You may treat the disposition of

In addition, the statement must

residential rental building that

substantially all of an activity as a

contain a declaration that the

qualified for the low-income housing

separate activity if you can prove with

activities make up an appropriate

credit. He has no other general

reasonable certainty:

economic unit for the measurement of

business credits.

1. The prior year unallowed

gain or loss under the passive activity

•

Mr. Jones received a Schedule K-1

losses, if any, allocable to the part of

rules.

(Form 1065) from the partnership.

the activity disposed of, and

The low-income housing credit

Regrouping. You must file a written

2. The net income or loss for the

($12,000) is shown on Schedule K-1,

statement with your original income

year of disposition allocable to the

box 15 with code D.

tax return for the tax year in which

part of the activity disposed of.

•

Mr. Jones’s net passive income for

you regroup the activities. The

2011 is zero.

statement must provide the names,

Disclosure Requirement

•

Mr. Jones will need the following

addresses, and EINs, if applicable,

forms to figure the low-income

For tax years beginning after January

for the activities that are being

housing credit.

24, 2010, the following disclosure

regrouped. If two or more activities

requirements for groupings apply.

are being regrouped into a single

1. Form 8586, Low-Income

You are required to report certain

activity, the statement must contain a

Housing Credit (not illustrated).

changes to your groupings that occur

declaration that the regrouped

2. Form 3800, General Business

during the tax year to the IRS. If you

activities make up an appropriate

Credit (not illustrated).

fail to report these changes, each

economic unit for the measurement of

3. Form 8582-CR, Passive

trade or business activity or rental

gain or loss under the passive activity

Activity Credit Limitations.

activity will be treated as a separate

rules. In addition, the statement must

Step 1. Mr. Jones follows the

activity. You will be considered to

contain an explanation of why the

instructions for code D on Schedule

have made a timely disclosure if you

original grouping was clearly

K-1, box 15, and enters the $12,000

filed all affected income tax returns

inappropriate or the nature of the

low-income housing credit on lines 11

consistent with the claimed grouping

material change in the facts and

and 12 of Form 8586 and carries over

and make the required disclosure on

circumstances that made the original

the total to Form 3800, Part III, line

the income tax return for the year in

grouping clearly inappropriate.

4d.

which you first discovered the failure

Dispositions

Step 2. Mr. Jones checks Box F in

to disclose. If the IRS discovered the

Part III of Form 3800 and brings the

failure to disclose, you must have

Unallowed PACs, unlike unallowed

$12,000 credit from the passive

reasonable cause for not making the

passive activity losses, are not

activity to line 32.

required disclosure. For more

allowed when you dispose of your

information on disclosure

Step 3. Line 33 of Form 3800 asks

interest in an activity. However, you

requirements, see Revenue

may elect to increase the basis of the

for the passive activity low-income

Procedure 2010-13 available at

www.

credit property by the amount of the

housing credit for 2011. The amount

irs.gov/irb/2010-04_IRB/ar15.html.

original basis reduction of the

is figured on Form 8582-CR and the

property to the extent that the credit

worksheets. Worksheet 3 of Form

New grouping. You must file a

has not been allowed under the

8582-CR is used for the post-1989

written statement with your original

passive activity rules. Unallowed

low-income housing credits.

-5-

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

Instructions For Form 8582-Cr - Passive Activity Credit Limitations - 2012 Page 5

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