Instructions For Form 8874 (2002) printable pdf download

Form 8874 (2002)

Page

General Instructions

Line 3

Note: The new markets credit may not be carried

back to a tax year ending before 2001.

S corporations and partnerships complete lines 1

Section references are to the Internal Revenue

and 2 and allocate the credit on line 3 to their

Recapture of the Credit

Code unless otherwise noted.

shareholders or partners on Schedule K-1.

Electing large partnerships must include this

You may have to increase your tax by a credit

Purpose of Form

credit in “general credits.”

recapture amount if at any time within 7 years

from the date of the original issuance of the

Use Form 8874 to claim the new markets credit

Part II—Allowable Credit

for qualified equity investments made in qualified

qualified equity investment:

community development entities (CDEs). This

● The entity ceases to be a qualified CDE,

The credit allowed for the current year may be

credit is part of the general business credit.

● Substantially all of the proceeds of the

limited based on your tax liability. Use Part II to

A qualified CDE is a domestic corporation or

investment cease to be used to make qualified

figure the allowable credit unless you must file

partnership:

low-income community investments, or

Form 3800, General Business Credit.

● The primary mission of which is serving, or

● The investment is redeemed by the entity.

Who must file Form 3800. You must file Form

providing investment capital for, low-income

3800 if you have:

See section 45D(g) for details, including how

communities or persons;

● Another credit included in the general

to figure the credit recapture amount. Generally,

● That maintains accountability to residents of

include the credit recapture amount on the line

business credit (other than a credit from Form

low-income communities through their

for recapture taxes (e.g., the “other taxes” or

8844 or 8884) or

representation on any governing board or

“total tax” line) on your income tax return for the

● A carryback or carryforward of any of those

advisory board of the entity; and

year in which the recapture event occurs

credits.

● That has been certified as a qualified CDE by

(e.g., line 61 of the 2002 Form 1040 or line 10 of

See the instructions for Form 3800 to find out

the 2002 Form 1120, Schedule J).

the Community Development Financial

which credits are included in the general

Institutions (CDFI) Fund of the Department of the

You are not subject to recapture of the credit

business credit.

Treasury.

solely because you sell or otherwise dispose of

Qualified CDEs also include specialized small

your investment. However, you cannot claim the

Line 10

business investment companies and community

credit for any credit allowance date after the

See section 38(c)(4) for special rules that apply

disposition.

development financial institutions. See section

to married couples filing separate returns and

45D(c)(2).

Basis Reduction

controlled corporate groups.

A qualified equity investment is generally stock

(other than nonqualified preferred stock) in a

Line 11

You must reduce your basis in your qualified

corporation or a capital interest in a partnership:

equity investment by the amount of the new

Although you may not owe the alternative

● Designated by the qualified CDE as a qualified

markets credits allowed (even if part or all of the

minimum tax (AMT), you generally must still

equity investment,

credit is not allowed for the current year and is

compute the tentative minimum tax (TMT) to

● Acquired solely for cash at its original issue (or

carried forward). However, do not reduce your

figure your allowable credit. For a small

basis for purposes of figuring the exclusion of

from a taxpayer for whom the investment was a

corporation exempt from the AMT under section

gain (a) for qualified small business stock under

qualified equity investment), and

55(e), enter zero. Otherwise, complete and

section 1202, (b) for certain DC zone assets

● Substantially all of the cost of which is used

attach the applicable AMT form or schedule and

under section 1400B, and (c) for certain qualified

by the qualified CDE to make qualified

enter the TMT on line 11.

community assets under section 1400F.

low-income community investments.

Line 14

Generally, a qualified CDE can designate an

Additional Information

equity investment as a qualified equity

If you cannot use all of your credit because of

For more details, see section 45D, Temporary

investment only if it applied for and received a

the tax liability limit (line 13 is smaller than line

Regulations section 1.45D-1T, or

new markets credit allocation from the CDFI

3), carry the unused credit back 1 year and then

Fund by the date the equity investment was

forward up to 20 years. See the instructions for

made. However, an equity investment made after

Form 3800 for details.

Specific Instructions

April 19, 2001, and before January 1, 2003, may

be designated as a qualified equity investment if,

before 2003, the CDE was certified as a qualified

Part I—Current Year Credit

Paperwork Reduction Act Notice. We ask for

CDE and it received notification of the credit

the information on this form to carry out the

allocation from the CDFI Fund. The maximum

Figure the credit for qualified equity investments

Internal Revenue laws of the United States. You

amount of equity investments so designated by

in a qualified CDE you own on line 1. Complete

are required to give us the information. We need

the qualified CDE cannot exceed the amount of

line 2 (instead of line 1) for a credit that was

it to ensure that you are complying with these

the allocation it received from the CDFI Fund. To

allocated to you by an S corporation or a

laws and to allow us to figure and collect the

the extent permitted by law, the names and

partnership from a qualified equity investment it

right amount of tax.

addresses of qualified CDEs that have received

made in a qualified CDE, either directly or

You are not required to provide the

an allocation for each allocation round and the

through another pass-through entity.

information requested on a form that is subject

amount of that allocation will be listed on the

to the Paperwork Reduction Act unless the form

Line 1

CDFI Fund web site at

displays a valid OMB control number. Books or

Enter the information requested for each

How To Figure the Credit

records relating to a form or its instruction must

qualified equity investment held directly by you

be retained as long as their contents may

on a credit allowance date in the current tax

A credit generally is allowed to the holder of the

become material in the administration of any

year. If you need more space, attach a

qualified equity investment on each of 7 credit

Internal Revenue law. Generally, returns and

statement showing all the information requested

allowance dates. The credit allowance dates are

return information are confidential, as required

for each qualified equity investment. On the last

the date the qualified equity investment is initially

by section 6103.

row on line 1, write “See attached” in column (a)

made in a qualified CDE, and that date for each

The time needed to complete and file this

and enter the total of the credit amounts from

of the next 6 years. The credit is equal to the

form will vary depending on individual

the attached statement in column (f).

qualified equity investment multiplied by 5% (6%

circumstances. The estimated average time is:

for the 4th through 7th years). However, the

Line 2

Recordkeeping

8 hr., 7 min.

credit is not allowed for a credit allowance date

if the investment is not a qualified equity

Learning about the

If you have a new markets credit from more than

investment on that date.

law or the form

53 min.

one pass-through entity, attach a statement

Credit allowed prior to your 2002 tax year. If

Preparing and sending

showing the employer identification number (EIN)

you have a credit allowance date that occurs

and credit amount for each pass-through entity,

the form to the IRS

1 hr., 4 min.

prior to your tax year beginning in 2002, do not

write “See attached” in the entry space for the

If you have comments concerning the

file Form 8874. Instead, include the credit on line

EIN, and enter the total of the credit amounts on

accuracy of these time estimates or suggestions

2 of Form 3800 for the prior tax year. Enter

line 2.

for making this form simpler, we would be happy

“NMC” and the amount of the credit on the

to hear from you. See the instructions of the tax

dotted line to the left of the entry space for line

return with which this form is filed.

2. Attach a statement showing the information

requested on line 1 or line 2 of this form (as

applicable), and file it with your original or

amended tax return for the tax year.

Instructions For Form 8874 (2002)

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