Instructions For Form 8582-Cr - Passive Activity Credit Limitations

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Department of the Treasury

Internal Revenue Service

Instructions for Form

8582-CR

Passive Activity Credit Limitations

instructions for each part, a brief

performed in a real property trade or

Section references are to the Internal

Revenue Code unless otherwise noted.

explanation of the purpose or use of

business unless you owned more

that part. These explanations give a

than 5% of the stock (or more than

General Instructions

general overview of how the form

5% of the capital or profits interest) in

works.

the employer.

Purpose of Form

3. A working interest in an oil or

Also, as you read the instructions

gas well. Your working interest must

Form 8582-CR is used by

that follow, see Example of How To

be held directly or through an entity

noncorporate taxpayers to figure the

Complete Form 8582-CR, beginning

that does not limit your liability (such

amount of any passive activity credit

on page 5. The example goes

as a general partner interest in a

(PAC) for the current tax year

through a six-step analysis of how the

partnership). In this case, it does not

(including any prior year unallowed

form and worksheets are completed

matter whether you materially

credits) and the amount of credit

for a partner in a limited partnership

participated in the activity for the tax

allowed for the current year. It also is

that has a low-income housing credit.

year.

used to make the election to increase

the basis of credit property when a

If, however, your liability was

Activities That Are Not

taxpayer disposes of his or her

limited for part of the year (for

Passive Activities

interest in an activity.

example, you converted your general

partner interest to a limited partner

PACs that are not allowed in the

The following are not passive

interest during the year), some of

current year are carried forward until

activities.

your income and losses from the

they are allowed against the tax on

1. Trade or business activities in

working interest may be treated as

either net passive income or the

which you materially participated for

passive activity gross income and

special allowance, if applicable.

the tax year.

passive activity deductions. See

2. Any rental real estate activity in

Different rules apply to your

Temporary Regulations section

which you materially participated if

activities and the related credit,

1.469-1T(e)(4)(ii).

you were a “real estate professional”

depending on the type of activity.

4. The rental of a dwelling unit you

for the tax year. You were a real

Generally, passive activities include:

used as a residence if section

•

estate professional only if:

Trade or business activities in

280A(c)(5) applies. This section

which you did not materially

a. More than half of the personal

applies if you rented out a dwelling

participate for the tax year.

services you performed in trades or

unit that you also used as a home

•

Rental activities, regardless of your

businesses during the tax year were

during the year for a number of days

participation.

performed in real property trades or

that exceeds the greater of 14 days

businesses in which you materially

See Trade or Business Activities

or 10% of the number of days during

participated, and

on page 3 and Rental Activities on

the year that the home was rented at

b. You performed more than 750

this page.

a fair rental.

hours of services during the tax year

5. An activity of trading personal

For more information, see Pub.

in real property trades or businesses

property for the account of owners of

925, Passive Activity and At-Risk

in which you materially participated.

interests in the activity. For purposes

Rules.

For purposes of item (2), each

of this rule, personal property means

Note. Corporations subject to the

interest in rental real estate is a

property that is actively traded, such

passive activity rules must use Form

separate activity unless you elect to

as stocks, bonds, and other

8810, Corporate Passive Activity

treat all interests in rental real estate

securities. See Temporary

Loss and Credit Limitations.

as one activity.

Regulations section 1.469-1T(e)(6).

If you are married filing jointly, one

Who Must File

spouse must separately meet both

Generally, credits from these

(2)(a) and (2)(b) without taking into

Form 8582-CR is filed by individuals,

activities are not entered on Form

account services performed by the

estates, and trusts with any of the

8582-CR. However, credits from

other spouse.

following credits from passive

these activities may be subject to

activities.

A real property trade or business is

limitations other than the passive

•

General business credits.

any real property development,

credit limitation rules.

•

Qualified electric and plug-in

redevelopment, construction,

electric vehicle credit.

reconstruction, acquisition,

Rental Activities

conversion, rental, operation,

Overview of Form

management, leasing, or brokerage

A rental activity is a passive activity

trade or business.

The form contains six parts. The

even if you materially participated in

Specific Instructions, starting on page

Services you performed as an

the activity (unless it is a rental real

8, include, at the beginning of the

employee are not treated as

estate activity in which you materially

Cat. No. 64649B

Instructions For Form 8582-Cr - Passive Activity Credit Limitations - 2008

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