Instructions For Form 8582-Cr - Passive Activity Credit Limitations

participated and you were a real

investment if the main purpose of

rules apply if you conduct the rental

estate professional).

holding the property is to realize a

activity through a publicly traded

gain from its appreciation and the

partnership (PTP). See Publicly

However, if you meet any of the

gross rental income is less than 2%

Traded Partnerships (PTPs) on page

five exceptions listed below, the

of the smaller of the unadjusted basis

14.

rental of the property is not treated as

or the fair market value (FMV) of the

If the rental activity is not

a rental activity. See Reporting

property.

conducted through a PTP, the

Credits From the Activities on this

Unadjusted basis is the cost of the

passive rental activity is entered in

page if you meet any of the

property without regard to

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

exceptions.

depreciation deductions or any other

and 9.

An activity is a rental activity if

basis adjustment described in section

Worksheet 1 is for credits (other

tangible property (real or personal) is

1016.

than rehabilitation credits and

used by customers or held for use by

The rental of property is incidental

low-income housing credits) from

customers and the gross income (or

to a trade or business activity if:

passive rental real estate activities in

expected gross income) from the

which you actively participated. See

a. You own an interest in the trade

activity represents amounts paid (or

Special Allowance for Rental Real

or business activity during the tax

to be paid) mainly for the use of the

Estate Activities beginning on this

year,

property. It does not matter whether

page.

b. The rental property was mainly

the use is under a lease, a service

used in the trade or business activity

Worksheet 2 is for rehabilitation

contract, or some other arrangement.

during the tax year or during at least

credits from passive rental real estate

Exceptions

2 of the 5 preceding tax years, and

activities and low-income housing

c. The gross rental income from

credits for property placed in service

An activity is not a rental activity if

the property is less than 2% of the

before 1990. This worksheet is also

any of the following exceptions are

smaller of the unadjusted basis or the

used for low-income housing credits

met.

FMV of the property.

from a partnership, S corporation, or

1. The average period of customer

other pass-through entity if your

Lodging provided for the

use is:

interest in the pass-through entity

employer’s convenience to an

a. 7 days or less, or

was acquired before 1990, regardless

employee or the employee’s spouse

b. 30 days or less and significant

of the date the property was placed in

or dependents is incidental to the

personal services (see below) were

service.

activity or activities in which the

provided in making the rental property

employee performs services.

Worksheet 3 is for low-income

available for customer use.

4. You customarily make the

housing credits for property placed in

Figure the average period of

rental property available during

service after 1989 (unless held

customer use for a class of property

defined business hours for

through a pass-through entity in

by dividing the total number of days in

nonexclusive use by various

which you acquired your interest

all rental periods by the number of

customers.

before 1990).

rentals during the tax year. If the

5. You provide property for use in

Worksheet 4 is for credits from

activity involves renting more than

a nonrental activity of a partnership, S

passive trade or business activities in

one class of property, multiply the

corporation, or joint venture in your

which you did not materially

average period of customer use of

capacity as an owner of an interest in

participate and passive rental real

each class by the ratio of the gross

the partnership, S corporation, or joint

estate activities in which you did not

rental income from that class to the

venture.

actively participate (but not

activity’s total gross rental income.

rehabilitation credits from passive

The activity’s average period of

Reporting Credits

rental real estate activities or

customer use equals the sum of

From the Activities

low-income housing credits).

these class-by-class average periods

weighted by gross income. See

If an activity meets any of the five

Special Allowance for

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

exceptions listed above, it is not a

Rental Real Estate Activities

rental activity. You must then

Significant personal services

If you actively participated in a

determine:

include only services performed by

passive rental real estate activity, you

individuals. To determine if personal

1. Whether your rental of the

may be able to claim credits from the

services are significant, all relevant

property is a trade or business activity

activity for the tax attributable to a

facts and circumstances are

(see Trade or Business Activities on

special allowance of up to $25,000,

considered. Facts and circumstances

page 3) and, if so,

reduced by any passive losses,

include the frequency of the services,

2. Whether you materially

including the commercial

the type and amount of labor required

participated in the activity for the tax

revitalization deduction, allowed

to perform the services, and the value

year (see Material Participation

under this exception on Form 8582,

of the services relative to the amount

beginning on page 3).

Passive Activity Loss Limitations.

charged for use of the property.

•

If the activity is a trade or business

2. Extraordinary personal services

The special allowance also applies

activity in which you did not materially

were provided in making the rental

to low-income housing credits and

participate, enter the credits from the

property available for customer use.

rehabilitation credits from a rental real

activity on Worksheet 4 on page 9.

estate activity, even if you did not

This applies only if the services are

•

If the activity is a trade or business

actively participate in the activity. The

performed by individuals and the

activity in which you did materially

credits allowed under the special

customers’ use of the rental property

participate, report the credits from the

allowance are in addition to the

is incidental to their receipt of the

activity on the forms you normally

credits allowed for the tax attributable

services.

use.

to net passive income.

3. Rental of the property is

incidental to a nonrental activity.

If the rental activity did not meet

The special allowance is not

The rental of property is incidental

any of the five exceptions, it is

available if you were married at the

to an activity of holding property for

generally a passive activity. Special

end of the year, are filing a separate

-2-

Instructions For Form 8582-Cr - Passive Activity Credit Limitations - 2008 Page 2

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