‘‘(A) IN GENERAL.—Except as otherwise
provided in this paragraph, the aggregate
amount to which paragraph (1) applies for any
taxable year shall not exceed $25,000 reduced
(but not below zero) by 50 percent of the
amount (if any) by which the adjusted gross in-
come of the taxpayer for the taxable year ex-
ceeds $100,000.
‘‘(B) PHASEOUT
NOT
APPLICABLE
TO
LOW-INCOME HOUSING CREDIT.—In the case of
the portion of the passive activity credit for any
taxable year which is attributable to any credit
determined under section 42—
‘‘(i) subparagraph (A) shall not apply,
and
‘‘(ii) paragraph (1) shall not apply to
the extent that the deduction equivalent of
such portion exceeds—
‘‘(I) 25,000, reduced by
‘‘(II) the aggregate amount of
the passive activity loss (and the de-
duction equivalent of any passive ac-
tivity credit which is not so attrib-
utable and is not attributable to the
rehabilitation credit determined under
section 47) to which paragraph (1)
applies after the application of sub-
paragraph (A).
‘‘(C) $65,000 LIMIT FOR REHABILITATION
CREDITS.—In the case of the portion of the
passive activity credit for any taxable year
which is attributable to the rehabilitation credit
determined under section 47—
‘‘(i) subparagraph (A) shall not apply,
and
‘‘(ii) paragraph (1) shall not apply to
the extent that the deduction equivalent of
such portion exceeds—
‘‘(I) $65,000, reduced by
‘‘(II) the aggregate amount of
the passive activity loss (and the de-
duction equivalent of any passive ac-
tivity credit which is not so attrib-
utable) to which paragraph (1) applies
for the taxable year after the applica-
tion of subparagraphs (A) and (B).
‘‘(3) ADJUSTED GROSS INCOME.—For purposes
of paragraph (2)(A), adjusted gross income shall be
determined without regard to—
‘‘(A) any amount includable in gross in-
come under section 86,
‘‘(B) any amount excludable from gross in-
come under section 135,
‘‘(C) any amount allowable as a deduction
under section 219, and
‘‘(D) any passive activity loss.’’
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 469(i)(4) of
such Code is amended to read as follows:
‘‘(B) 
REDUCTION
FOR
SURVIVING
SPOUSE’S EXEMPTION.—For purposes of sub-
paragraph (A), the $25,000 amounts under
paragraph (2)(A) and (2)(B)(ii) and the
$65,000 amount under paragraph (2)(C)(ii)
shall each be reduced by the amount of the ex-
emption under paragraph (1) (determined with-
out regard to the reduction contained in para-
graph (2)(A)) which is allowable to the surviv-
ing spouse of the decedent for the taxable year
ending with or within the taxable year of the es-
tate.’’
(2) Subparagraph (A) of section 469(i)(5) of
such Code is amended by striking clauses (i), (ii),
and (iii) and inserting the following:
‘‘(i) ‘$12,500’ for ‘$25,000’ in sub-
paragraphs (A) and (B)(ii) of paragraph
(2),
‘‘(ii) ‘$50,000’ for ‘$100,000’ in para-
graph (2)(A)’’, and
‘‘(iii) ‘$32,500’ for ‘$65,000’ in para-
graph (2)(C)(ii).’’
(3) The subsection heading for subsection (i) of
section 469 of such Code is amended by striking
‘‘$25,000’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
December 31, 1992, in taxable years ending after such
date.
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