Department of the Treasury 2002 Internal Revenue Service

Instructions for Form

8582-CR

Passive Activity Credit Limitations

Section references are to the Internal Revenue Code unless otherwise noted.

General Instructions • Enhanced oil recovery credit. for the tax year. You were a real • Disabled access credit. estate professional only if: • Renewable electricity production a. More than half of the personal Purpose of Form credit. services you performed in trades or

Form 8582-CR is used by • Empowerment zone and renewal businesses were performed in real noncorporate taxpayers to figure the community employment credit. property trades or businesses in amount of any passive activity credit • Indian employment credit. which you materially participated and

(PAC) for the current tax year • Credit for employer social security b. You performed more than 750 (including any prior year unallowed and Medicare taxes paid on certain hours of services in real property credits) and the amount of credit employee tips. trades or businesses in which you allowed for the current year. It also is • Orphan drug credit. materially participated. used to make the election to increase • Credit for small employer pension For purposes of this rule, each plan startup costs. the basis of credit property when a interest in rental real estate is a taxpayer disposes of his or her • Credit for employer-provided child

care facilities and services. separate activity unless you elect to interest in an activity. • New York Liberty Zone business treat all interests in rental real estate

PACs that are not allowed in the employee credit. as one activity. current year are carried forward until • Nonconventional source fuel credit. If you are married filing jointly, one they are allowed against the tax on • Qualified electric vehicle credit. spouse must separately meet both of either net passive income or the • General credits from electing large the above conditions without taking special allowance, if applicable. partnerships. into account services performed by

Different rules apply to your the other spouse.

activities and the related credit, Overview of Form A real property trade or business is depending on the type of activity. The form contains six parts. The any real property development, Generally, passive activities include: Specific Instructions, starting on redevelopment, construction, • Trade or business activities in page 9, include, at the beginning of reconstruction, acquisition, which you did not materially the instructions for each part, a brief conversion, rental, operation, participate for the tax year. explanation of the purpose or use of management, leasing, or brokerage • Rental activities, regardless of your that part. These explanations give a trade or business. Services you participation. general overview of how the form performed as an employee are not See Trade or Business Activities works. treated as performed in a real on page 3 and Rental Activities on property trade or business unless you page 2. Also, as you read the instructions owned more than 5% of the stock (or that follow, see Example of How To For more information, see Pub. more than 5% of the capital or profits Complete Form 8582-CR, beginning 925, Passive Activity and At-Risk interest) in the employer. on page 5. The example goes Rules. 3. A working interest in an oil or through a four-step analysis of how

Note: Corporations subject to the gas well. Your working interest must the form and worksheets are

passive activity rules must use Form completed for a partner in a limited be held directly or through an entity

8810, Corporate Passive Activity partnership that has a low-income that does not limit your liability (such

Loss and Credit Limitations. housing credit. This example may as a general partner interest in a

provide enough information to partnership). In this case, it does not

Who Must File complete the form and worksheets matter whether you materially

without reading all of the instructions. participated in the activity for the tax Form 8582-CR is filed by individuals, year. estates, and trusts with any of the

following credits from passive Activities That Are Not If, however, your liability was

activities. limited for part of the year (for

• Investment credit (including the Passive Activities example, you converted your general

rehabilitation credit, energy credit, The following are not passive partner interest to a limited partner activities. and reforestation credit). interest during the year), some of

• Work opportunity credit. 1. Trade or business activities in your income and losses from the

• Welfare-to-work credit. which you materially participated for working interest may be treated as

• Credit for alcohol used as fuel. the tax year. passive activity gross income and

• Credit for increasing research 2. Any rental real estate activity in passive activity deductions. See

activities. which you materially participated if Temporary Regulations section

• Low-income housing credit. you were a “real estate professional” 1.469-1T(e)(4)(ii).

Cat. No. 64649B
4. The rental of a dwelling unit you activity’s total gross rental income. 5. You provide property for use in

used as a residence if section a nonrental activity of a partnership, S The activity’s average period of

280A(c)(5) applies. This section corporation, or joint venture in your customer use equals the sum of

applies if you rented out a dwelling capacity as an owner of an interest in these class-by-class average periods unit that you also used as a home the partnership, S corporation, or joint weighted by gross income. See during the year for a number of days venture. Regulations section 1.469-1(e)(3)(iii). that exceeds the greater of 14 days Significant personal services or 10% of the number of days during include only services performed by Reporting Credits From the the year that the home was rented at individuals. To determine if personal Activities a fair rental. services are significant, all relevant 5. An activity of trading personal If an activity meets any of the five facts and circumstances are property for the account of owners of exceptions listed above, it is not a considered. Facts and circumstances rental activity. You then must interests in the activity. For purposes include the frequency of the services, of this rule, personal property means determine: the type and amount of labor required property that is actively traded, such 1. Whether your rental of the to perform the services, and the value as stocks, bonds, and other property is a trade or business activity of the services relative to the amount securities. See Temporary (see Trade or Business Activities charged for use of the property. Regulations section 1.469-1T(e)(6). on page 3) and, if so, 2. Extraordinary personal 2. Whether you materially Generally, credits from these services were provided in making the participated in the activity for the tax activities are not entered on Form rental property available for customer year (see Material Participation on 8582-CR. However, credits from use. page 3). these activities may be subject to Extraordinary personal services limitations other than the passive • If the activity is a trade or business are services provided in making credit limitation rules. activity in which you did not rental property available for customer materially participate, enter the use only if they are performed by Rental Activities credits from the activity on Worksheet individuals and the customers’ use of 4 on page 11. A rental activity is a passive activity the rental property is incidental to • If the activity meets any of the five even if you materially participated in their receipt of the services. exceptions listed above and is a trade the activity (unless it is a rental real 3. Rental of the property is or business activity in which you did estate activity in which you materially incidental to a nonrental activity. materially participate, report the participated and you were a real The rental of property is incidental credits from the activity on the forms estate professional). to an activity of holding property for you normally use. However, if you meet any of the investment if the main purpose of If the rental activity did not meet

five exceptions listed below, the holding the property is to realize a any of the five exceptions, it is rental of the property is not treated as gain from its appreciation and the generally a passive activity. Special a rental activity. See Reporting gross rental income is less than 2% rules apply if you conduct the rental Credits From the Activities on this of the smaller of the unadjusted activity through a publicly traded page if you meet any of the basis or the fair market value (FMV) partnership (PTP). See Publicly exceptions. of the property. Traded Partnerships (PTPs) on

An activity is a rental activity if Unadjusted basis is the cost of the page 15.

tangible property (real or personal) is property without regard to If the rental activity is not used by customers or held for use by depreciation deductions or any other conducted through a PTP, the customers and the gross income (or basis adjustment described in section passive rental activity is entered in expected gross income) from the 1016. Worksheet 1, 2, 3, or 4 on pages 10 activity represents amounts paid (or The rental of property is incidental and 11.

to be paid) mainly for the use of the to a trade or business activity if: Worksheet 1 is for credits (other property. It does not matter whether a. You owned an interest in the than rehabilitation credits and the use is under a lease, a service

contract, or some other arrangement. trade or business activity during the low-income housing credits) from

tax year, passive rental real estate activities in

Exceptions b. The rental property was mainly which you actively participated. See

used in the trade or business activity Special Allowance for Rental Real An activity is not a rental activity if: during the tax year or during at least Estate Activities on page 3. 1. The average period of

customer use is: 2 of the 5 preceding tax years, and Worksheet 2 is for rehabilitation

c. The gross rental income from credits from passive rental real estate a. 7 days or less or the property is less than 2% of the activities and low-income housing b. 30 days or less and significant smaller of the unadjusted basis or the credits for property placed in service personal services (see below) were FMV of the property. before 1990. This worksheet is also provided in making the rental property Lodging provided for the used for low-income housing credits available for customer use.

employer’s convenience to an from a partnership, S corporation, or Figure the average period of employee or the employee’s spouse other pass-through entity if your customer use for a class of property or dependents is incidental to the interest in the pass-through entity by dividing the total number of days in activity or activities in which the was acquired before 1990, regardless all rental periods by the number of employee performs services. of the date the property was placed in rentals during the tax year. If the service. activity involves renting more than 4. You customarily make the

one class of property, multiply the rental property available during Worksheet 3 is for low-income

average period of customer use of housing credits for property placed in defined business hours for

each class by the ratio of the gross service after 1989 (unless held nonexclusive use by various

rental income from that class to the through a pass-through entity in customers.

-2-
which you acquired your interest year your interest (including your If your modified adjusted gross

before 1990). spouse’s interest) in the activity was income is $250,000 or more

Worksheet 4 less than 10% (by value) of all ($125,000 or more if married filing is for credits from interests in the activity. Active separately), there is no special passive trade or business activities in

which you did not materially participation is a less stringent allowance.

requirement than material participate and passive rental real No modified adjusted gross participation (see Material estate activities in which you did not income limitation applies when Participation below). actively participate (but not figuring the special allowance for rehabilitation credits from passive You may be treated as actively low-income housing credits for rental real estate activities or participating if, for example, you property placed in service after 1989 low-income housing credits). participated in making management (other than from a pass-through entity

Special Allowance for Rental decisions or arranging for others to in which you acquired your interest provide services (such as repairs) in before 1990). Real Estate Activities a significant and bona fide sense.

Active Participation. If you actively Management decisions that may Trade or Business

participated in a passive rental real count as active participation include:

estate activity, you may be able to • Approving new tenants, Activities

claim credits from the activity for the • Deciding on rental terms, A trade or business activity is an • Approving capital or repair tax attributable to a special allowance activity (other than a rental activity or of up to $25,000, reduced by any expenditures, and an activity treated as incidental to an

passive losses, including the • Other similar decisions. activity of holding property for

commercial revitalization deduction, The maximum special allowance investment) that:

allowed under this exception on Form is: 1. Involves the conduct of a trade 8582, Passive Activity Loss • $25,000 for single individuals and or business (within the meaning of Limitations. married individuals filing a joint return section 162), for the tax year. The special allowance also applies 2. Is conducted in anticipation of • $12,500 for married individuals to low-income housing credits and starting a trade or business, or who file separate returns for the tax rehabilitation credits from a rental real 3. Involves research or year and who lived apart from their estate activity, even if you did not experimental expenditures deductible spouses at all times during the tax actively participate in the activity. The under section 174 (or that would be if year. credits allowed under the special you chose to deduct rather than • $25,000 for a qualifying estate allowance are in addition to the capitalize them). reduced by the special allowance for credits allowed for the tax attributable which the surviving spouse qualified. to net passive income. Reporting Credits From the Modified adjusted gross income The special allowance is not limitation. If your modified adjusted Activities available if you were married, are gross income (defined in the filing a separate return for the year, Trade or business activities with

and lived with your spouse at any instructions for line 10 on page 10) is material participation. If you

time during the year. $100,000 or less ($50,000 or less if materially participated in a trade or married filing separately), figure your Only an individual, business activity, the activity is not a a qualifying credits based on the amount of the passive activity. Report the credits estate, or a qualified revocable maximum special allowance referred from the activity on the forms you trust that made an election to treat to in the preceding paragraph. normally use. the trust as part of the decedent’s

estate may actively participate in a If your modified adjusted gross Trade or business activities

rental real estate activity. Limited income is more than $100,000 without material participation. If

partners may not actively participate ($50,000 if married filing separately), you did not materially participate in a unless future regulations provide an your special allowance is limited to trade or business activity, the activity exception. 50% of the difference between is a passive activity. Generally, you

A qualifying estate is the estate of $150,000 ($75,000 if married filing must use Worksheet 4 on page 11 to separately) and your modified a decedent for tax years ending less figure the amount to enter on Form adjusted gross income. than 2 years after the date of the 8582-CR for each trade or business

decedent’s death if the decedent Generally, if your modified activity in which you did not materially

would have satisfied the active adjusted gross income is $150,000 or participate. However, if you held the

participation requirements for the more ($75,000 or more if married activity through a PTP, special rules

rental real estate activity for the tax filing separately), there is no special apply. See Publicly Traded

year the decedent died. allowance. Partnerships (PTPs) on page 15.

A qualified revocable trust may However, for low-income housing elect to be treated as part of a credits for property placed in service Material Participation decedent’s estate for purposes of the before 1990 and for rehabilitation For the material participation tests special allowance for active credits, the limits on modified that follow, participation generally participation in rental real estate adjusted gross income are increased. includes any work done in connection activities. The election must be made If your modified adjusted gross with an activity if you owned an by both the executor (if any) of the income is more than $200,000 interest in the activity at the time you decedent’s estate and the trustee of ($100,000 if married filing separately), did the work. The capacity in which the revocable trust. For details, see your special allowance is limited to you did the work does not matter. Regulations section 1.645-1. 50% of the difference between However, work is not participation if:

 You are not considered to actively $250,000 ($125,000 if married filing • It is not work that an owner would

participate in a rental real estate separately) and your modified customarily do in the same type of

activity if at any time during the tax adjusted gross income. activity and

-3-
• One of your main reasons for doing during the year for more than 500 indirectly owned your limited partner

the work was to avoid the hours. interest).

disallowance of losses or credits from A significant participation activity A limited partner’s share of an the activity under the passive activity is any trade or business activity in electing large partnership’s taxable rules. which you participated for more than income or loss from all trade or

Proof of participation. You may 100 hours during the year and in business and rental activities is

prove your participation in an activity which you did not materially treated as income or loss from the

by any reasonable means. You do participate under any of the material conduct of a single passive trade or not have to maintain participation tests (other than this business activity. contemporaneous daily time reports, fourth test). Special rules for certain retired or logs, or similar documents if you can 5. You materially participated in

establish your participation by other disabled farmers and surviving the activity for any 5 (whether or not spouses of farmers. Certain retired reasonable means. For this purpose, consecutive) of the 10 immediately or disabled farmers and surviving reasonable means include, but are preceding tax years. spouses of farmers are treated as not limited to, identifying services 6. The activity is a personal materially participating in a farming performed over a period of time and service activity in which you activity if the real property used in the the approximate number of hours materially participated for any 3 activity meets the estate tax rules for spent performing the services during (whether or not consecutive) special valuation of farm property that period, based on appointment preceding tax years. passed from a qualifying decedent. books, calendars, or narrative An activity is a personal service See Temporary Regulations section summaries. activity if it involves the performance 1.469-5T(h)(2). Test for investors. Work done as an of personal services in the fields of investor in an activity is not treated as health, law, engineering, architecture, Estates and trusts. The PAC

participation unless you were directly accounting, actuarial science, limitations apply to an estate or trust.

involved in the day-to-day performing arts, consulting, or in any See Temporary Regulations sections

management or operations of the other trade or business in which 1.469-1T(b)(2) and (3). The rules for

activity. For purposes of this test, capital is not a material determining material participation for

work done as an investor includes: income-producing factor. this purpose have not yet been

issued. 1. Studying and reviewing 7. Based on all the facts and

financial statements or reports on circumstances, you participated in the

operations of the activity. activity on a regular, continuous, and Grouping of Activities

2. Preparing or compiling substantial basis during the tax year. Generally, one or more trade or summaries or analyses of the You did not materially participate in business activities or rental activities

finances or operations of the activity the activity under this seventh test, may be treated as a single activity if for your own use. however, if you participated in the the activities make up an appropriate 3. Monitoring the finances or activity for 100 hours or less during economic unit for the measurement of

operations of the activity in a the tax year. Your participation in gain or loss under the passive activity nonmanagerial capacity. managing the activity does not count rules. Whether activities make up an

in determining whether you materially appropriate economic unit depends Test for a spouse. Participation by participated under this test if: on all the relevant facts and your spouse during the tax year in an circumstances. The factors given the a. Any person (except you) activity you own may be counted as greatest weight in determining received compensation for performing your participation in the activity, even whether activities make up an services in the management of the if your spouse did not own an interest appropriate economic unit are: activity or in the activity and whether or not you b. Any individual spent more 1. Similarities and differences in and your spouse file a joint return for hours during the tax year than you types of trades or businesses, the tax year. spent performing services in the 2. The extent of common control, Tests for individuals. You management of the activity 3. The extent of common

materially participated for the tax year ownership, (regardless of whether the individual in an activity if you satisfy at least one was compensated for the 4. Geographical location, and of the following tests. management services). 5. Reliance between or among the

1. You participated in the activity activities.

for more than 500 hours. Special rules for limited partners. 2. Your participation in the activity Example. You have a significant If you were a limited partner in an for the tax year was substantially all ownership interest in a bakery and a activity, you generally did not of the participation in the activity of all movie theater in Baltimore and in a materially participate in the activity. individuals (including individuals who bakery and a movie theater in You did materially participate in the did not own any interest in the Philadelphia. Depending on all the activity, however, if you met material activity) for the year. relevant facts and circumstances, participation test 1, 5, or 6 above for 3. You participated in the activity there may be more than one the tax year. for more than 100 hours during the reasonable method for grouping your

tax year, and you participated at least However, for purposes of the activities. For instance, the following

as much as any other individual material participation tests, you are groupings may or may not be

(including individuals who did not own not treated as a limited partner if you permissible.

any interest in the activity) for the also were a general partner in the • A single activity,

year. partnership at all times during the • A movie theater activity and a

4. The activity is a significant partnership’s tax year ending with or bakery activity,

participation activity for the tax within your tax year (or, if shorter, • A Baltimore activity and a

year, and you participated in all during the portion of the partnership’s Philadelphia activity, or

significant participation activities tax year in which you directly or • Four separate activities.

-4-
Once you choose a grouping involving the rental of personal Partial disposition of an activity.

under these rules, you must continue property (except personal property You may treat the disposition of

using that grouping in later tax years provided in connection with the real substantially all of an activity as a

unless a material change in the facts property or vice versa). separate activity if you can prove with

and circumstances makes it clearly 3. Any activity with another activity reasonable certainty:

inappropriate. in a different type of business and in 1. The prior year unallowed

The IRS may regroup your losses, if any, allocable to the part of which you hold an interest as a

activities if your grouping fails to the activity disposed of and limited partner or as a limited

reflect one or more appropriate entrepreneur (as defined in section 2. The net income or loss for the

economic units and one of the year of disposition allocable to the 464(e)(2)), if that other activity

primary purposes of your grouping is part of the activity disposed of. engages in holding, producing, or

distributing motion picture films or to avoid the passive activity

limitations. videotapes; farming; leasing section

1245 property; or exploring for (or Dispositions Limitation on grouping certain exploiting) oil and gas resources or Unallowed PACs, unlike unallowed activities. The following activities geothermal deposits. passive activity losses, are not may not be grouped together. allowed when you dispose of your 1. A rental activity with a trade or Activities conducted through interest in an activity. However, you business activity unless the activities partnerships, S corporations, and may elect to increase the basis of the being grouped together make up an C corporations subject to section credit property by the amount of the appropriate economic unit and 469. Once a partnership or original basis reduction of the

a. The rental activity is corporation determines its activities property to the extent that the credit under these rules, a partner or insubstantial relative to the trade or has not been allowed under the

business activity or vice versa or shareholder may use these rules to passive activity rules. Unallowed

b. Each owner of the trade or group those activities with: PACs that are not used to increase

business activity has the same • Each other, the basis of the credit property are

proportionate ownership interest in • Activities conducted directly by the carried forward until they are allowed. partner or shareholder, or the rental activity. If so, the portion of To make the election, complete Part • Activities conducted through other the rental activity involving the rental VI of Form 8582-CR. No basis

of property to be used in the trade or partnerships and corporations. adjustment may be elected on a

business activity may be grouped A partner or shareholder may not partial disposition of your interest in a

with the trade or business activity. treat as separate activities those passive activity.

2. An activity involving the rental activities grouped together by the

of real property with an activity partnership or corporation.

Mr. Jones received a Schedule K-1 from the partnership. The low-income housing credit is shown on line 12(a)(1) of Schedule K-1.

Example of How To Complete Form 8582-CR

In 2002, John Jones purchased an interest as a limited partner in Partnership A. Mr. Jones is married and files a joint return. During

2002, the partnership placed in service a residential rental building that qualified for the low-income housing credit.

Schedule K-1:

Mr. Jones’ net passive income for 2002 is zero.

12a Low-income housing credit:

12a(1) (1) From section 42(j)(5) partnerships

12a(2) (2) Other than on line 12a(1)

Form 8586, line 5

Qualified rehabilitation expenditures related to rental real estate

activities

b

Credits

12b

Credits (other than credits shown on lines 12a and 12b) related

to rental real estate activities

c See page 8 of Partner’s

Instructions for Schedule K-1

(Form 1065).

12c

d Credits related to other rental activities 12d

13 Other credits 13

For Paperwork Reduction Act Notice, see Instructions for Form 1065. Cat. No. 11394R Schedule K-1 (Form 1065) 2002





-5-
● Form 8582-CR, Passive Activity Credit Limitations.

Step 1. Mr. Jones will need the following forms to report the low-income housing credit:

Mr. Jones follows the instructions for line 12a of Schedule K-1 and enters the employer identification number (EIN) of the partnership

and the $12,000 low-income housing credit on line 5 of Form 8586, and completes line 6.

● Form 8586, Low-Income Housing Credit.

John and Mary Jones 123-00-4567

10 5566650 12,000

12,000

Step 2. Line 7 of Form 8586 asks for the passive activity credit for 2002. The amount is figured on Form 8582-CR and the worksheets.

Worksheet 3 for Lines 3a and 3b

Total. Enter on lines 3a and 3b of Form 8582-CR 

Worksheet 3 of Form 8582-CR is used for post-1989 low-income housing credits.

(keep for your records)

Prior Year

Unallowed Credits

Current Year

Credits Total Credits From Name of Activity Form (a) Credit line 3a (b) Credit line 3b (c) Add cols. (a) and (b)

Partnership A 12,000

12,000

8586

OMB No. 1545-0984

Form 8586 Low-Income Housing Credit

Department of the Treasury

Internal Revenue Service

Attachment

Attach to your tax return. Sequence No. 36b

Name(s) shown on return Identifying number

Current Year Credit (see instructions)

1 Number of Forms 8609 attached 

2 Eligible basis of buildings (total from attached Schedules A (Form 8609), line 1) 2

3a Qualified basis of low-income buildings (total from attached Schedules A (Form 8609), line 3) 3a

b Has there been a decrease in the qualified basis of any buildings since the close of the preceding

(i) (ii) (iii) (iv)

4 Current year credit from attached Schedules A (Form 8609) (see instructions) 4

If you are a— Then enter the total of the current year credits from—

a Shareholder Schedule K-1 (Form 1120S), lines 12b(1) and (2)

5 Low-income housing credits from pass-through entities (if more than one entity, see instructions):

5

6 Add lines 4 and 5. See instructions to find out if you complete lines 7 through 18 or file Form 3800 6

Part I

 EIN of pass-through entity

–

7 Current year credit or passive activity credit (see instructions) 7

tax year?

buildings that had a decreased basis. If you need more space, attach a schedule.

Yes No If “Yes,” enter the building identification numbers (BINs) of the

b Partner

c Beneficiary

Schedule K-1 (Form 1065), lines 12a(1) and (2), or

Schedule K-1 (Form 1065-B), box 8

Schedule K-1 (Form 1041), line 14

(99)

2002

-6-
Mr. Jones follows the instructions for Worksheet 3 and enters the total credits from column (a) of that worksheet on line 3a of Form

8582-CR. He enters the total credits on line 3c and completes lines 5 through 7 of the form. Mr. Jones can skip Parts II and III and go

to Part IV because the only credit he has is from a post-1989 low-income housing rental real estate activity. He must also complete the

computation for line 35 in the instructions to get the amount to enter on line 35 of the form.

John and Mary Jones 123-00-4567

12,000

-0-

12,000

12,000

12,000

12,000

8,750

-0-

8,750

12,000

12,000

Special Allowance for Low-Income Housing Credits for Property Placed in Service After 1989

Note: Complete this part only if you have an amount on line 3c. Otherwise, go to Part V.

31 If you completed Part III, enter the amount from line 19. Otherwise, subtract line 16 from line 7 31

32 Enter the amount from line 30 32

33 Subtract line 32 from line 31. If zero, enter -0- here and on line 36 33

34 Enter the smaller of line 3c or line 33 34

35 Tax attributable to the remaining special allowance (see page 12) 35

36 Enter the smaller of line 34 or line 35 36

Part IV

OMB No. 1545-1034

Form 8582-CR Passive Activity Credit Limitations

See separate instructions.

Department of the Treasury

Internal Revenue Service

Attachment

Attach to Form 1040 or 1041. Sequence No. 89

Name(s) shown on return Identifying number

2002 Passive Activity Credits

Caution: If you have credits from a publicly traded partnership, see Publicly Traded Partnerships (PTPs) on page 15

of the instructions.

Credits From Rental Real Estate Activities With Active Participation (Other Than Rehabilitation

Credits and Low-Income Housing Credits) (See Lines 1a through 1c on page 9.)

1a Credits from Worksheet 1, column (a) 1a

b Prior year unallowed credits from Worksheet 1, column (b) 1b

c Add lines 1a and 1b 1c

Rehabilitation Credits From Rental Real Estate Activities and Low-Income Housing Credits for

Property Placed in Service Before 1990 (or From Pass-Through Interests Acquired Before 1990)

(See Lines 2a through 2c on page 9.)

2a Credits from Worksheet 2, column (a) 2a

b Prior year unallowed credits from Worksheet 2, column (b) 2b

c Add lines 2a and 2b 2c

Low-Income Housing Credits for Property Placed in Service After 1989 (See Lines 3a through

3c on page 9.)

3a Credits from Worksheet 3, column (a) 3a

b Prior year unallowed credits from Worksheet 3, column (b) 3b

c Add lines 3a and 3b 3c

All Other Passive Activity Credits (See Lines 4a through 4c on page 9.)

4a Credits from Worksheet 4, column (a) 4a

b Prior year unallowed credits from Worksheet 4, column (b) 4b

c Add lines 4a and 4b 4c

5 Add lines 1c, 2c, 3c, and 4c 5

6 Enter the tax attributable to net passive income (see page 9) 6

7 Subtract line 6 from line 5. If line 6 is more than or equal to line 5, enter -0- and see page 10 7

Part I

Note: If your filing status is married filing separately and you lived with your spouse at any time

during the year, do not complete Part II, III, or IV. Instead, go to line 37.

2002

-7-
Step 3. After completing Form 8582-CR, Mr. Jones determines his allowed and unallowed credit. Because he has only one type of

credit from a single passive activity, his allowed low-income housing credit for 2002 is the amount on line 37, or $8,750. His unallowed

credit of $3,250 is determined by subtracting the allowed credit on line 37 from the total credit on line 5 ($12,000 – $8,750).

Step 4. Mr. Jones enters the allowed passive activity credit of $8,750 on line 7 of Form 8586 and completes Part II of that form

according to the instructions for Form 8586. The unallowed credit of $3,250 is carried forward and used to figure the passive activity

credit allowed for 2003.

8,750

John and Mary Jones 123-00-4567

10 5566650 12,000

12,000

8,750

Line 35 computation:

Line 35. Figure the tax attributable to the remaining special allowance as follows:

Note: When using taxable income in the above computation, it is not necessary to refigure items that are based on a percentage

of adjusted gross income.

A. Taxable income 305,000

B.

C.

D.

Tax on line A. Use the Tax Table, Tax Rate Schedules, the Capital Gain Tax Worksheet, or Schedule D (Form 1040) (or Schedule

D (Form 1041)), whichever applies

E.

Enter $25,000 ($12,500 if married filing separate return and you and your spouse lived apart at

all times during the year) 25,000

F.

Enter amount, if any, from line 10 of Form 8582 -0-

25,000

G.

Subtract lines D and E from line C

280,000

H.

Subtract line F from line A

I.

Tax on line G. Use the Tax Table, Tax Rate Schedules, the Capital Gain Tax Worksheet, or Schedule D (Form 1040) (or Schedule

D (Form 1041)), whichever applies 79,813

8,750

J.

Subtract line H from line B

Add lines 16 and 30 of Form 8582-CR and enter the total -0-

Tax attributable to the remaining special allowance. Subtract line J from line I. Enter the result on line 35 of Form 8582-CR 8,750

Mr. Jones completes Part V of Form 8582-CR:

88,563

Passive Activity Credit Allowed

37 Passive Activity Credit Allowed. Add lines 6, 16, 30, and 36. See page 12 to find out how to

report the allowed credit on your tax return and how to allocate allowed and unallowed credits if

you have more than one credit or credits from more than one activity. If you have any credits from

a publicly traded partnership, see Publicly Traded Partnerships (PTPs) on page 15 37

Part V

OMB No. 1545-0984

Form 8586 Low-Income Housing Credit

Department of the Treasury

Internal Revenue Service

Attachment

Attach to your tax return. Sequence No. 36b

Name(s) shown on return Identifying number

Current Year Credit (see instructions)

1 Number of Forms 8609 attached 

2 Eligible basis of buildings (total from attached Schedules A (Form 8609), line 1) 2

3a Qualified basis of low-income buildings (total from attached Schedules A (Form 8609), line 3) 3a

b Has there been a decrease in the qualified basis of any buildings since the close of the preceding

(i) (ii) (iii) (iv)

4 Current year credit from attached Schedules A (Form 8609) (see instructions) 4

If you are a— Then enter the total of the current year credits from—

a Shareholder Schedule K-1 (Form 1120S), lines 12b(1) and (2)

5 Low-income housing credits from pass-through entities (if more than one entity, see instructions):

5

6 Add lines 4 and 5. See instructions to find out if you complete lines 7 through 18 or file Form 3800 6

Part I

 EIN of pass-through entity

–

7 Current year credit or passive activity credit (see instructions) 7

tax year?

buildings that had a decreased basis. If you need more space, attach a schedule.

Yes No If “Yes,” enter the building identification numbers (BINs) of the

b Partner

c Beneficiary

Schedule K-1 (Form 1065), lines 12a(1) and (2), or

Schedule K-1 (Form 1065-B), box 8

Schedule K-1 (Form 1041), line 14

(99)

2002

Enter amount, if any, from line 14 of Form 8582 -0-

K.

-8-
passive activities disallowed for prior qualifying estates who had Specific Instructions years and carried forward to this year. rehabilitation credits from rental real

estate activities or low-income If you had only one type of prior housing credits for property placed in Current Year Credits year unallowed credit from a single service before 1990 must include the Convert any current year qualified passive activity, figure your prior year credits from those activities on lines expenditures into credits before unallowed credit by subtracting line 2a and 2b. Use Worksheet 2 to figure beginning Worksheet 1, 2, 3, or 4. 37 of your 2001 Form 8582-CR from the amounts to enter on lines 2a and

Form 3800, General Business line 5 of your 2001 Form 8582-CR. 2b.

Credit. Enter the credits from line 3 Otherwise, your prior year of Form 3800 in column (a) of unallowed credits are the amounts If you have low-income housing Worksheet 1, 2, 3, or 4. If the credits shown in column (b) of Worksheet 9 credits for property placed in service are from more than one activity or are in the 2001 Instructions for Form after 1989, include those credits in of more than one type, separate the 8582-CR. Enter the prior year Worksheet 3 instead of Worksheet 2. credits by activity or type before unallowed credits in column (b) of If you held an indirect interest in the making entries in the worksheets. Worksheet 1, 2, 3, or 4, whichever property through a partnership, S Example. You have a low-income apply. corporation, or other pass-through housing credit from one activity and a entity, use Worksheet 3 only if you research credit from a different also acquired your interest in the activity. Enter the low-income housing Part I—2002 Passive pass-through entity after 1989. credit in column (a) of Worksheet 2

and make a separate entry for the Activity Credits research credit in column (a) of Include the credits in

Worksheet 4. Use Part I to combine your credits Worksheet 4, but not in from passive activities to determine if CAUTION Worksheet 2 or 3, if you are

!

Form 8586, Low-Income Housing you have a PAC for 2002. married filing a separate return and Credit. If you are not required to file lived with your spouse at any time Form 3800, enter the portion of the If your credits from all passive during the year. credit attributable to passive activities activities exceed the tax attributable

from line 6 of Form 8586 in column to net passive income, you have a (a) of Worksheet 2 or 3. PAC for 2002. Generally, you have Lines 3a through 3c. Individuals

(including limited partners) and Form 8834, Qualified Electric net passive income if line 4 of Form

8582 shows income. See the qualifying estates who had Vehicle Credit. Enter the credits

from line 11 of Form 8834 in column instructions for line 6 of Form low-income housing credits from

8582-CR on this page for other rental real estate activities for (a) of Worksheet 1 or 4. If the credits details. property placed in service after 1989 are from more than one activity,

separate the credits by activity before must include those credits on lines 3a

making entries in the worksheet. Lines 1a through 1c. Individuals through 3c instead of Worksheet 2. If and qualifying estates that actively you held an indirect interest in the Form 8844, Empowerment Zone participated in rental real estate property through a partnership, S and Renewal Community activities (other than rental real estate corporation, or other pass-through Employment Credit. Enter the activities with rehabilitation credits or entity, use lines 3a through 3c only if credits from line 5 of Form 8844 in low-income housing credits) must you also acquired your interest in the column (a) of Worksheet 1 or 4. If the include the credits from these pass-through entity after 1989. Use credits are from more than one activities on lines 1a through 1c. Use Worksheet 3 to figure the amounts to activity, separate the credits by Worksheet 1 to figure the amounts to enter on lines 3a and 3b. activity before making entries in the enter on lines 1a and 1b. worksheet.

Form 8884, New York Liberty Zone See Special Allowance for Lines 4a through 4c. Individuals

Business Employee Credit. Enter Rental Real Estate Activities on must include on lines 4a through 4c

page 3. credits from passive activities that the credits from line 5 of Form 8884

were not entered on Worksheets 1, 2, in column (a) of Worksheet 1 or 4. If

the credits are from more than one Include the credits in or 3. Trusts must include credits from

activity, separate the credits by Worksheet 4, but not in all passive activities in Worksheet 4.

activity before making entries in the CAUTION Worksheet 1, if you are Use Worksheet 4 to figure the !

worksheet. married filing a separate return and amounts to enter on lines 4a and 4b.

Nonconventional source fuel lived with your spouse at any time

credit. Figure your credit from during the year, even if you actively Line 6. If line 4 of Form 8582 shows

passive activities for fuel produced participated. net income or you did not complete

from a nonconventional source and Form 8582 because you had net

enter the credit in column (a) of Note: You may take credits that passive income, you must figure the

Worksheet 4. arose in a prior tax year (other than tax on the net passive income. If you

See section 29 for more low-income housing and rehabilitation have an overall loss on an entire

credits) under the special allowance disposition of your interest in a information on the credit for fuel only if you actively participated in the passive activity, reduce net passive produced from a nonconventional rental real estate activity for both that income, if any, on line 4 of Form 8582 source. prior year and this year. If you did not to the extent of the loss (but not

Prior Year Unallowed actively participate for both years, below zero) and use only the include the credits in Worksheet 4, remaining net passive income in the Credits but not in Worksheet 1. computation on page 10. If you had a

To figure this year’s PAC, you must Lines 2a through 2c. Individuals net passive activity loss, enter zero

take into account any credits from (including limited partners) and on line 6 and go on to line 7.

-9-
Figure the tax on net passive allowed. In this case, enter the their spouses at all times during the

income as follows. amount from line 5 on line 37 and year must enter $75,000 on line 9

report the credits on the forms instead of $150,000. Married persons A. Taxable income normally used. Do not complete filing separate returns who lived with including net passive

income ........... Worksheets 5 through 9. their spouses at any time during the

B. Tax on line A. Use the Tax Table, year are not eligible for the special

Tax Rate Schedules, the Capital allowance. They must enter zero on Gain Tax Worksheet, or Schedule D Part II—Special line 16 and go to line 17. (Form 1040) (or Schedule D (Form

1041)), whichever applies ....... Allowance for Rental Line 10. To figure modified C. Taxable income without adjusted gross income, combine all net passive income . . . Real Estate Activities D. Tax on line C. Use the Tax Table, the amounts used to figure adjusted

Tax Rate Schedules, the Capital With Active Participation gross income except: Gain Tax Worksheet, or Schedule D • Any passive activity loss as defined (Form 1040) (or Schedule D (Form Married persons filing in section 469(d)(1); 1041)), whichever applies .......

E. Subtract line D from line B and separate returns who lived • Any rental real estate loss allowed enter the result on line 6 of Form CAUTION with their spouses at any time under section 469(c)(7) to real estate

!

8582-CR ................. during the year are not eligible to professionals (defined under

Note: When using taxable income in complete Part II. Activities That Are Not Passive

the above computation, it is not Use Part II to figure the credit Activities on page 1);

necessary to refigure items that are allowed if you have any credits from • Any overall loss from a PTP;

based on a percentage of adjusted rental real estate activities in which • The taxable amount of social

gross income. you actively participated (other than security and tier 1 railroad retirement

Line 7. rehabilitation credits and low-income benefits; If line 7 is zero because the housing credits). See Rental tax on the net passive income on line • The deduction allowed under

6 is greater than your credits from section 219 for contributions to IRAs Activities on page 2 for details.

passive activities on line 5, all your Line 9. Married persons filing and certain other qualified retirement

credits from passive activities are separate returns who lived apart from plans;

Lines 1a and 1b. Use Worksheet 1 to figure the amounts to enter on lines 1a and 1b. Use line 1a for credits from rental real estate

activities with active participation for the current year and line 1b for prior year unallowed credits from rental real estate activities with

active participation in both the prior year in which the credit arose and the current year. See Special Allowance for Rental Real Estate

Activities on page 3 for a definition of active participation.

After you complete the worksheet below, enter the totals of columns (a) and (b) on the corresponding lines of Form 8582-CR and

then complete line 1c.

Note: Rehabilitation credits from rental real estate activities and low-income housing credits must be entered in Worksheet 2 or 3,

whichever applies, even if you actively participated in the activity.

Worksheet 1 for Lines 1a and 1b (keep for your records)

Prior Year

Unallowed Credits

Current Year

Credits Total Credits From Name of Activity Form (a) Credit line 1a (b) Credit line 1b (c) Add cols. (a) and (b)

Totals. Enter on lines 1a and 1b of Form 8582-CR 

Lines 2a and 2b. Use Worksheet 2 to figure the amounts to enter on lines 2a and 2b. Use line 2a for rehabilitation credits and

low-income housing credits from rental real estate activities for the current year and line 2b for prior year unallowed credits from those

activities. However, use Worksheet 3 instead of Worksheet 2 if you have any low-income housing credits for property placed in service

after 1989. If you held an indirect interest in the property through a partnership, S corporation, or other pass-through entity, use

Worksheet 3 only if you also acquired your interest in the pass-through entity after 1989. Use this worksheet if you do not meet both

requirements.

After you complete the worksheet below, enter the totals of columns (a) and (b) on the corresponding lines of Form 8582-CR and

then complete line 2c.

Worksheet 2 for Lines 2a and 2b (keep for your records)

Prior Year

Unallowed Credits

Current Year

Credits Total Credits From Name of Activity Form (a) Credit line 2a (b) Credit line 2b (c) Add cols. (a) and (b)

Totals. Enter on lines 2a and 2b of Form 8582-CR 

-10-
• The deduction allowed under When figuring modified adjusted Line 15. Figure the tax attributable to

section 164(f) for one-half of gross income, any overall loss from the amount on line 14 as follows.

self-employment taxes; an entire disposition of an interest in A. Taxable income ....... • The exclusion from income of a passive activity is taken into B. Tax on line A. Use the Tax Table, interest from series EE and I U.S. account as a nonpassive loss if you Tax Rate Schedules, the Capital

savings bonds used to pay higher do not have any net passive income Gain Tax Worksheet, or Schedule D

education expenses; after combining net income and (Form 1040) (or Schedule D (Form

1041)), whichever applies ....... • The exclusion of amounts received losses from all other passive activities C. Enter amount from line A under an employer’s adoption (that is, line 4 of Form 8582 is a loss above ............. assistance program; or zero). If you do have net passive D. Enter amount from line 14

• The student loan interest income when you combine the net of Form 8582-CR ......

E. Subtract line D from line C deduction; or losses and net income from all other F. Tax on line E. Use the Tax Table, • The tuition and fees deduction. passive activities, the overall loss Tax Rate Schedules, the Capital

Include in modified adjusted gross from the disposition is taken into Gain Tax Worksheet, or Schedule D

income any portfolio income and account as a nonpassive loss only to (Form 1040) (or Schedule D (Form

1041)), whichever applies ....... expenses that are clearly and directly the extent that it exceeds that net

G. Subtract line F from line B and enter allocable to portfolio income. Also passive income. the result on line 15 of Form

include any income that is treated as Line 12. Do not enter more than 8582-CR .................

nonpassive income, such as overall $12,500 on line 12 if you are married Note: When using taxable income in gain from a PTP and net income from filing a separate return and you and the above computation, it is not an activity or item of property subject your spouse lived apart at all times necessary to refigure items that are to the recharacterization of passive during the year. Married persons filing based on a percentage of adjusted income rules. For information on separate returns who lived with their gross income. recharacterization of income, see spouses at any time during the year

Pub. 925 or Temporary Regulations are not eligible for the special

section 1.469-2T(f) and Regulations allowance. They must enter zero on

section 1.469-2(f). line 16 and go to line 17.

Lines 3a and 3b. Use Worksheet 3 to figure the amounts to enter on lines 3a and 3b for low-income housing credits for property

placed in service after 1989. If you held an indirect interest in the property through a partnership, S corporation, or other pass-through

entity, use Worksheet 3 only if you also acquired your interest in the pass-through entity after 1989. Use line 3a for the current year

credits and line 3b for prior year unallowed credits for those activities.

Worksheet 3 for Lines 3a and 3b

Totals. Enter on lines 3a and 3b of Form 8582-CR 

After you complete the worksheet below, enter the totals of columns (a) and (b) on the corresponding lines of Form 8582-CR and

then complete line 3c.

(keep for your records)

Prior Year

Unallowed Credits

Current Year

Credits Total Credits From Name of Activity Form (a) Credit line 3a (b) Credit line 3b (c) Add cols. (a) and (b)

Lines 4a and 4b. Use Worksheet 4 to figure the amounts to enter on lines 4a and 4b. Use line 4a for credits from all other passive

activities for the current year and line 4b for prior year unallowed credits from those activities.

After you complete the worksheet below, enter the totals of columns (a) and (b) on the corresponding lines of Form 8582-CR and

then complete line 4c.

Worksheet 4 for Lines 4a and 4b (keep for your records)

Prior Year

Unallowed Credits

Current Year

Credits Total Credits From Name of Activity Form (a) Credit line 4a (b) Credit line 4b (c) Add cols. (a) and (b)

Totals. Enter on lines 4a and 4b of Form 8582-CR 

-11-
Note: When using taxable income in

Part III—Special the above computation, it is not

necessary to refigure items that are Part V—Passive Activity Allowance for based on a percentage of adjusted

gross income. Credit Allowed Rehabilitation Credits Use Part V to figure the PAC (as From Rental Real Estate determined in Part I) that is allowed

Part IV—Special for 2002 for all passive activities. Activities and Line 37. If you have only one type of Low-Income Housing Allowance for credit, the amount on line 37 is the

Credits for Property Low-Income Housing credit allowed for the year. Enter this

amount on the form where it is Placed in Service Before Credits for Property normally reported. See Reporting

Placed in Service After Allowed Credits on Your Tax 1990 (or From Return below. Your unallowed credit

Pass-Through Interests 1989 is line 5 minus line 37.

Acquired Before 1990) Use Worksheets 5 through 9, Married persons filing whichever apply, on pages 13 and separate returns who lived 14, to allocate the allowed and Married persons filing CAUTION with their spouses at any time

!

unallowed credits if you have credits separate returns who lived during the year are not eligible to from more than one activity. Also use with their spouses at any time complete Part IV. CAUTION

!

the worksheets if you must allocate during the year are not eligible to Use Part IV to figure the credit the credits because they are reported complete Part III. allowed if you have any low-income on different forms. Use Part III to figure the credit housing credits for property placed in Keep a record of each unallowed allowed if you have any rehabilitation service after 1989. If you held an credit and the activity to which it credits or low-income housing credits indirect interest in the property belongs so you may claim the credit if for property placed in service before through a partnership, S corporation, it becomes allowable in a future year. 1990. Also use this part if your or other pass-through entity, use Part low-income housing credit is from a IV only if your interest in the Reporting Allowed Credits partnership, S corporation, or other pass-through entity was also acquired on Your Tax Return pass-through entity in which you after 1989.

acquired your interest before 1990, Form 3800. Enter on line 5 of Form Line 35. Figure the tax attributable to regardless of the date the property 3800 the total passive activity general the remaining special allowance as was placed in service. business credit allowed. follows.

Line 21. Married persons filing Form 8586. If you are not required to

A. Taxable income ......... separate returns who lived apart from file Form 3800, enter on line 7 of B. Tax on line A. Use the Tax Table, Tax their spouses at all times during the Form 8586 any allowed low-income Rate Schedules, the Capital Gain Tax year must enter $125,000 on line 21, Worksheet, or Schedule D (Form 1040) housing credit.

instead of $250,000. (or Schedule D (Form 1041)), Form 8834. Enter on line 13 of Form

whichever applies ............. Skip lines 21 through 26 if you 8834 the passive activity qualified C. Enter $25,000 completed Part II of this form and electric vehicle credit allowed. ($12,500 if married

your modified adjusted gross income filing separate return Form 8844. Enter on line 7 of Form

on line 10 in Part II was $100,000 or and you and your 8844 the passive activity spouse lived apart at less ($50,000 or less if married filing empowerment zone and renewal all times during the separately and you lived apart from year) community employment credit ...........

your spouse for the entire year). D. Enter amount, if any, allowed.

Instead, enter the amount from line from line 10 of Form

8582 ........... Form 8884. Enter on line 7 of Form

15 on line 27. E. Enter the amount, if 8884 the passive activity New York

Line 24. Do not enter more than any, from line 14 of Liberty Zone business employee $12,500 on line 24 if you are married Form 8582 ....... credit allowed.

F. Subtract lines D and E from filing a separate return and lived apart Nonconventional Source Fuel line C ................ from your spouse for the entire year. G. Subtract line F from line A . . . Credit. If you have an allowed

Line 27. Figure the tax attributable to H. Tax on line G. Use the Tax Table, Tax passive activity credit for fuel Rate Schedules, the Capital Gain Tax the amount on line 26 as follows. produced from a nonconventional Worksheet, or Schedule D (Form 1040) source, see section 29 for limitations (or Schedule D (Form 1041)), A. Taxable income ....... whichever applies ............. and adjustments to the credit. Attach B. Tax on line A. Use the Tax Table, Tax

Rate Schedules, the Capital Gain Tax I. Subtract line H from line B ....... a separate schedule to your tax J. Add lines 16 and 30 of Form 8582-CR Worksheet, or Schedule D (Form return showing how you figured the and enter the total ............. 1040) (or Schedule D (Form 1041)), credit. If you have both passive and K. Tax attributable to the remaining whichever applies ............. special allowance. Subtract line J from nonpassive credits, combine the C. Enter amount from line A

above .............. line I. Enter the result on line 35 of credits before applying the limitations

D. Enter amount from line 26 Form 8582-CR ............... and adjustments. Report the credit on

of Form 8582-CR ...... the line specified by the instructions Note: When using taxable income in E. Subtract line D from line C for the tax return you file. F. Tax on line E. Use the Tax Table, Tax the above computation, it is not

Rate Schedules, the Capital Gain Tax necessary to refigure items that are Worksheet, or Schedule D (Form based on a percentage of adjusted 1040) (or Schedule D (Form 1041)), gross income. whichever applies .............

G. Subtract line F from line B and enter

the result on line 27 of Form 8582-CR

-12-
Instructions for Worksheet 5

Complete Worksheet 5 if you have an amount on line 1c of Form 8582-CR and you have credits from more than one activity.

Column (a). Enter the credits from Worksheet 1, column (c), in column (a) of this worksheet.

Column (b). Divide each of the credits shown in column (a) by the total of the credits in column (a) and enter the ratio for each of the

activities in column (b). The total of all the ratios must equal 1.00.

Column (c). Multiply line 16 of Form 8582-CR by the ratios in column (b) and enter the result in column (c). If the total of this column is

the same as the total of column (a), all credits for the activities in column (a) of this worksheet are allowed. Report them on the forms

normally used, and complete Worksheet 6 if you have credits shown in Worksheet 2. Also complete Worksheet 7 or 8 if you have

credits shown in Worksheet 3 or 4. If the total of column (a) is more than the total of column (c), complete column (d).

Column (d). Subtract column (c) from column (a) and enter the result in this column. Also enter the name of each activity and the form

the credit is reported on in Worksheet 8 and enter the amount from column (d) of this worksheet in column (a) of Worksheet 8. Also

complete Worksheet 6 or 7 if you have credits on line 2c or 3c of Form 8582-CR.

Worksheet 5 for Credits on Line 1a or 1b (keep for your records)

(b) Ratios (c) Special

Allowance

(d) Subtract

column (c) from

column (a)

(a) Credits Form To Be Name of Activity Reported on

Totals 1.00

Instructions for Worksheet 6

Complete Worksheet 6 if you have an amount on line 2c of Form 8582-CR and you have credits from more than one activity.

Column (a). Enter the credits from Worksheet 2, column (c), in column (a) of this worksheet.

Column (b). Divide each of the credits shown in column (a) by the total of the credits in column (a) and enter the ratio for each of the

activities in column (b). The total of all the ratios must equal 1.00.

Column (c). Multiply line 30 of Form 8582-CR by the ratios in column (b) and enter the result in column (c). If the total of this column is

the same as the total of column (a), all credits for the activities in column (a) of this worksheet are allowed. Report them on the forms

normally used, and complete Worksheet 7 or 8 if you have credits shown in Worksheet 3 or 4 or amounts in column (d) of Worksheet 5.

If the total of column (a) is more than the total of column (c), complete column (d).

Column (d). Subtract column (c) from column (a) and enter the result in this column. Also enter the name of each activity and the form

the credit is reported on in Worksheet 8 and enter the amount from column (d) of this worksheet in column (a) of Worksheet 8.

Worksheet 6 for Credits on Line 2a or 2b (keep for your records)

(d) Subtract

column (c) from

column (a)

(c) Special

Allowance (a) Credits (b) Ratios Form To BeReported on Name of Activity

Totals 1.00

-13-
Instructions for Worksheet 8

Complete Worksheet 8 if you have credits on line 4c of Form 8582-CR from more than one activity or reported on different forms or you

have amounts in column (d) of Worksheets 5, 6, or 7.

Column (a). Enter the amounts, if any, from column (c) of Worksheet 4 and column (d) of Worksheets 5, 6, and 7.

Column (b). Divide each of the credits in column (a) by the total of all the credits in column (a). The total of all the ratios must equal

1.00.

Column (c). Complete the following computation:

A. Enter line 5 of Form 8582-CR

B. Enter line 37 of Form 8582-CR

C. Subtract line B from line A

Multiply line C by the ratios in column (b) and enter the results in column (c). Complete Worksheet 9 to determine the credits allowed

for 2002.

Worksheet 8—Allocation of Unallowed Credits (keep for your records)

(a) Credits (b) Ratios (c) Unallowed Credits Form To Be

Reported on Name of Activity

Totals 1.00

Instructions for Worksheet 9

Column (a). Enter all the activities shown in Worksheet 8. The credits entered in column (a) of this worksheet are the credits shown in

column (c) of Worksheets 1, 2, 3, and 4 for the activities listed in Worksheet 8.

Column (b). Enter the amounts from column (c) of Worksheet 8 in this column. These are your unallowed credits for 2002.

Column (c). Subtract column (b) from column (a). These are the allowed credits for 2002. Report the amounts in this column on the

forms normally used. See Reporting Allowed Credits on Your Tax Return on page 12.

Worksheet 9—Allowed Credits (keep for your records)

(a) Credits (b) Unallowed Credits (c) Allowed Credits Form To Be

Reported on Name of Activity

Totals 

Instructions for Worksheet 7

Complete Worksheet 7 if you have credits on line 3c of Form 8582-CR and you have credits from more than one activity.

Column (a). Enter the credits from Worksheet 3, column (c), in column (a) of this worksheet.

Column (b). Divide each of the credits shown in column (a) by the total of the credits in column (a) and enter the ratio for each of the

activities in column (b). The total of all the ratios must equal 1.00.

Column (c). Multiply line 36 of Form 8582-CR by the ratios in column (b) and enter the result in column (c). If the total of this column is

the same as the total of column (a), all credits for the activities in column (a) of this worksheet are allowed. Report them on the forms

normally used, and complete Worksheet 8 if you have credits shown in Worksheet 4 or amounts in column (d) of Worksheet 5 or 6. If

the total of column (a) is more than the total of column (c), complete column (d).

Column (d). Subtract column (c) from column (a) and enter the result in this column. Also enter the name of each activity and the form

the credit is reported on in Worksheet 8 and enter the amount from column (d) of this worksheet in column (a) of Worksheet 8.

Worksheet 7 for Credits on Line 3a or 3b (keep for your records)

(d) Subtract

column (c) from

column (a)

(c) Special

Allowance (a) Credits (b) Ratios Form To Be

Reported on Name of Activity

Totals 1.00

-14-
Publicly Traded Computation of Allowed housing credits from PTPs in which

you acquired your interest before Partnerships (PTPs) Passive Activity Credits 1990 (regardless of the date placed in From PTPs A PTP is a partnership whose service) allowed under the special

interests are traded on an established allowance are the smaller of the total Complete Steps 1 and 2 only if you

securities market or are readily have net passive income from a PTP credits from Step 3 or the amount

tradable on a secondary market (or with passive activity credits (including figured in Step 4. If Step 4 is smaller prior year unallowed credits). its substantial equivalent). than Step 3, allocate the amount in

Step 1. Figure the tax attributable to Step 4 pro rata to the credits from

An established securities market net passive income from each PTP each PTP in Step 3.

includes any national securities with passive activity credits (including Note: Complete Steps 6 through 8 exchange and any local exchange prior year unallowed credits) by

following the steps shown in the only if you have low-income housing registered under the Securities worksheet in the line 6 instructions credits (including prior year unallowed Exchange Act of 1934 or exempted beginning on page 9. Complete a credits) for property placed in service from registration because of the separate tax computation for each after 1989 from a PTP in which you limited volume of transactions. It also PTP with net passive income. acquired your interest after 1989. includes any over-the-counter market.

Step 2. Passive activity credits from Step 6. Reduce low-income housing

each PTP are allowed to the extent of credits (including prior year unallowed A secondary market generally the tax attributable to net passive credits) for property placed in service exists if a person stands ready to income from the same PTP. Credits after 1989 from each PTP in which make a market in the interest. An in excess of the tax attributable to net you also acquired your interest after interest is treated as readily tradable passive income may be allowed 1989 to the extent of the tax if the interest is regularly quoted by under one or more steps below. attributable to net passive income persons, such as brokers or dealers, from that PTP, which was figured in who are making a market in the Complete Steps 3 through 5 only if Step 1. interest. your passive activity credits (including

prior year unallowed credits) include Step 7. Before beginning this step, rehabilitation credits from rental real The substantial equivalent of a complete Form 8582-CR if you have estate activities from PTPs, secondary market exists if there is no any passive credits that are not from low-income housing credits for identifiable market maker, but holders PTPs. Subtract the sum of the credits property placed in service before of interests have a readily available, allowed in Step 5 above and line 36 1990 from PTPs, or low-income regular, and ongoing opportunity to of Form 8582-CR from the amount on housing credits from PTPs in which sell or exchange their interests line 35 of Form 8582-CR to figure the you acquired your interest before through a public means of obtaining tax attributable to the special 1990 (regardless of the date placed in or providing information on offers to allowance available for the credits in service). buy, sell, or exchange interests. Step 6. Similarly, the substantial equivalent of Step 3. Reduce rehabilitation credits

a secondary market exists if from rental real estate activities from If your only passive credits are

prospective buyers and sellers have each PTP, low-income housing from PTPs, complete the steps

the opportunity to buy, sell, or credits for property placed in service shown in the worksheet in the line 35

exchange interests in a timeframe before 1990 from each PTP, and any instructions on page 12. Subtract the

and with the regularity and continuity low-income housing credits (including credits allowed in Step 5 above from

that the existence of a market maker prior year unallowed credits) from the tax figured on line K of that

would provide. each PTP in which you acquired your worksheet. The result is the tax

interest before 1990 (regardless of attributable to the special allowance the date placed in service) to the available for the credits in Step 6. Credits From PTPs extent of the tax, which was figured in

A credit from a passive activity held Step 1, attributable to net passive Step 8. Low-income housing credits

through a PTP is allowed to the income from that PTP. allowed under the special allowance

extent of the tax attributable to net Step 4. Before beginning this step, for property placed in service after

passive income from that partnership. complete Form 8582-CR if you have 1989 from a PTP in which you also

In addition, rehabilitation credits and any passive credits that are not from acquired your interest after 1989 are

low-income housing credits from PTPs. Subtract the total of lines 16, the smaller of the total credits from

rental real estate activities held 30, and 36, if any, of Form 8582-CR, Step 6 or the amount figured in Step

7. If Step 7 is smaller than Step 6, through PTPs are allowed to the from the amount on line 27 of Form

extent of any special allowance that 8582-CR, to figure the tax attributable allocate the amount in Step 7 pro rata

remains after taking into account to the special allowance available for to the credits from each PTP in Step

the credits in Step 3. 6. losses and credits from rental real

estate activities not owned through If your only passive credits are Step 9. Add the credits from Steps 2, PTPs. See Special Allowance for from PTPs, complete lines 21 through 5, and 8. These are the total credits Rental Real Estate Activities on 27 of Form 8582-CR as a worksheet. allowed from passive activities of page 3. The amount on line 27 is the tax PTPs. attributable to the special allowance

Do not enter credits from available for the credits in Step 3. Step 10. Figure the allowed and

PTPs on the worksheets or on Step 5. Rehabilitation credits from unallowed credits from each PTP. CAUTION Form 8582-CR. Instead, use rental real estate activities of PTPs, Report the allowed credits on the

!

the following steps to figure the low-income housing credits for forms normally used. Keep a record

allowed and unallowed credits from property placed in service before of the unallowed credits to be carried

passive activities held through PTPs. 1990 by PTPs, and low-income forward to 2003.

-15-
credit limitations. The amount of the records relating to a form or its

Part VI—Election To unallowed credit that may be applied instructions must be retained as long

against tax is reduced by the amount as their contents may become Increase Basis of Credit of the basis adjustment. material in the administration of any

Property No basis adjustment may be Internal Revenue law. Generally, tax

elected on a partial disposition of your returns and return information are Complete Part VI if you disposed of interest in a passive activity or if the confidential, as required by section your entire interest in a passive disposition is not fully taxable. The 6103. activity and elect to increase the amount of any unallowed credit, The time needed to complete and basis of the credit property used in however, remains available to offset file this form will vary depending on the activity by the unallowed credit the tax attributable to net passive individual circumstances. The that reduced the basis of the income. estimated average time is: property.

Line 38. Check the box if you elect to Recordkeeping . . . . . . . . . 2 hr., 4 min.

increase the basis of credit property Paperwork Reduction Act Notice. Learning about the law or

used in a passive activity by the We ask for the information on this the form . . . . . . . . . . . . . . 10 hr., 7 min.

unallowed credit that reduced the form to carry out the Internal Preparing the form . . . . . . . 4 hr., 42 min. property’s basis. The election is Revenue laws of the United States. Copying, assembling, and available for a fully taxable disposition You are required to give us the sending the form to the IRS 2 hr., 11 min. of an entire interest in an activity for information. We need it to ensure that

which a basis adjustment was made you are complying with these laws If you have comments concerning

as a result of placing in service and to allow us to figure and collect the accuracy of these time estimates

property for which a credit was taken. the right amount of tax. or suggestions for making this form

You may elect to increase the basis You are not required to provide the simpler, we would be happy to hear

of the credit property immediately information requested on a form that from you. See the instructions for the

before the disposition (by an amount tax return with which this form is filed. is subject to the Paperwork Reduction no greater than the amount of the Act unless the form displays a valid original basis reduction) to the extent OMB control number. Books or

that the credit had not been allowed

previously because of the passive

-16-