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the activity (unless it is a rental real

holding the property is to realize a

Traded Partnerships (PTPs) on page

estate activity in which you materially

gain from its appreciation and the

14.

participated and you were a real

gross rental income is less than 2%

If the rental activity is not

estate professional).

of the smaller of the unadjusted basis

conducted through a PTP, the

or the fair market value (FMV) of the

However, if you meet any of the

passive rental activity is entered in

property.

five exceptions listed below, the

Worksheet 1, 2, 3, or 4 on pages 8

Unadjusted basis is the cost of the

rental of the property is not treated as

and 9.

property without regard to

a rental activity. See Reporting

Worksheet 1 is for credits (other

Credits From the Activities on this

depreciation deductions or any other

than rehabilitation credits and

page if you meet any of the

basis adjustment described in section

low-income housing credits) from

exceptions.

1016.

passive rental real estate activities in

The rental of property is incidental

An activity is a rental activity if

which you actively participated. See

to a trade or business activity if:

tangible property (real or personal) is

Special Allowance for Rental Real

used by customers or held for use by

a. You own an interest in the trade

Estate Activities beginning on this

customers and the gross income (or

or business activity during the tax

page.

year,

expected gross income) from the

Worksheet 2 is for rehabilitation

b. The rental property was mainly

activity represents amounts paid (or

credits from passive rental real estate

used in the trade or business activity

to be paid) mainly for the use of the

activities and low-income housing

property. It does not matter whether

during the tax year or during at least

credits for property placed in service

the use is under a lease, a service

2 of the 5 preceding tax years, and

before 1990. This worksheet is also

c. The gross rental income from

contract, or some other arrangement.

used for low-income housing credits

the property is less than 2% of the

from a partnership, S corporation, or

Exceptions

smaller of the unadjusted basis or the

other pass-through entity if your

An activity is not a rental activity if

FMV of the property.

interest in the pass-through entity

any of the following exceptions are

Lodging provided for the

was acquired before 1990, regardless

met.

employer’s convenience to an

of the date the property was placed in

1. The average period of customer

employee or the employee’s spouse

service.

use is:

or dependents is incidental to the

Worksheet 3 is for low-income

a. 7 days or less, or

activity or activities in which the

housing credits for property placed in

b. 30 days or less and significant

employee performs services.

service after 1989 (unless held

personal services were provided in

4. You customarily make the

through a pass-through entity in

making the rental property available

rental property available during

which you acquired your interest

for customer use.

defined business hours for

before 1990).

Figure the average period of

nonexclusive use by various

Worksheet 4 is for credits from

customer use for a class of property

customers.

passive trade or business activities in

by dividing the total number of days in

5. You provide property for use in

which you did not materially

all rental periods by the number of

a nonrental activity of a partnership, S

participate and passive rental real

rentals during the tax year. If the

corporation, or joint venture in your

estate activities in which you did not

activity involves renting more than

capacity as an owner of an interest in

actively participate (but not

one class of property, multiply the

the partnership, S corporation, or joint

rehabilitation credits from passive

average period of customer use of

venture.

rental real estate activities or

each class by the ratio of the gross

low-income housing credits).

rental income from that class to the

Reporting Credits

Special Allowance for

activity’s total gross rental income.

From the Activities

The activity’s average period of

Rental Real Estate Activities

If an activity meets any of the five

customer use equals the sum of

If you actively participated in a

exceptions listed above, it is not a

these class-by-class average periods

passive rental real estate activity, you

rental activity. You must then

weighted by gross income. See

may be able to claim credits from the

determine:

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

activity for the tax attributable to a

1. Whether your rental of the

Significant personal services

special allowance of up to $25,000,

property is a trade or business activity

include only services performed by

reduced by any passive losses,

(see Trade or Business Activities on

individuals. To determine if personal

including the commercial

page 3) and, if so,

services are significant, all relevant

revitalization deduction, allowed

2. Whether you materially

facts and circumstances are

under this exception on Form 8582,

participated in the activity for the tax

considered. Facts and circumstances

Passive Activity Loss Limitations.

year (see Material Participation

include the frequency of the services,

The special allowance also applies

beginning on page 3).

the type and amount of labor required

to low-income housing credits and

to perform the services, and the value

•

rehabilitation credits from a rental real

If the activity is a trade or business

of the services relative to the amount

estate activity, even if you did not

activity in which you did not materially

charged for use of the property.

actively participate in the activity. The

participate, enter the credits from the

2. Extraordinary personal services

credits allowed under the special

activity on Worksheet 4 on page 9.

were provided in making the rental

•

allowance are in addition to the

If the activity is a trade or business

property available for customer use.

credits allowed for the tax attributable

activity in which you did materially

This applies only if the services are

to net passive income.

participate, report the credits from the

performed by individuals and the

activity on the forms you normally

customers’ use of the rental property

The special allowance is not

use.

available if you were married at the

is incidental to their receipt of the

end of the year, are filing a separate

services.

If the rental activity did not meet

return for the year, and lived with your

3. Rental of the property is

any of the five exceptions, it is

incidental to a nonrental activity.

spouse at any time during the year.

generally a passive activity. Special

The rental of property is incidental

rules apply if you conduct the rental

Only an individual, a qualifying

to an activity of holding property for

activity through a publicly traded

estate, or a qualified revocable trust

investment if the main purpose of

partnership (PTP). See Publicly

that made an election to treat the

-2-

Instructions for Form 8582-CR (2010)

Instructions For Form 8582-Cr - Passive Activity Credit Limitations - Internal Revenue Service - Page 2

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