Passive Activity Credit Limitations

Instructions for Form
8582-CR

Department of the Treasury
Internal Revenue Service

(Rev. January 2012)

For use with Form 8582-CR (Rev. January 2012)
Passive Activity Credit Limitations
Section references are to the Internal
Revenue Code unless otherwise noted.

8810, Corporate Passive Activity
Loss and Credit Limitations.

What’s New

Form 8582-CR is filed by individuals,
estates, and trusts with any of the
following credits from passive
activities.
• General business credits.
• Qualified plug-in electric and
electric vehicle credit.

General Instructions Who Must File
Disclosure requirements for
groupings. For tax years beginning
after January 24, 2010, disclosure
requirements for groupings of trade or
business activities or rental activities
apply. See Disclosure Requirement,
later.
Future developments. The IRS has
created a page on IRS.gov for
information about Form 8582-CR and
its instructions, at www.irs.gov/
form8582cr. Information about any
future developments affecting Form
8582-CR (such as legislation enacted
after we release it) will be posted on
that page.

Purpose of Form

Form 8582-CR is used by
noncorporate taxpayers to figure the
amount of any passive activity credit
(PAC) for the current tax year
(including any prior year unallowed
credits) and the amount of credit
allowed for the current year. It also is
used to make the election to increase
the basis of credit property when a
taxpayer disposes of his or her
interest in an activity.
PACs that are not allowed in the
current year are carried forward until
they are allowed against the tax on
either net passive income or the
special allowance, if applicable.
Different rules apply to your
activities and the related credit,
depending on the type of activity.
Generally, passive activities include:
• Trade or business activities in
which you did not materially
participate for the tax year.
• Rental activities, regardless of your
participation.
See Trade or Business Activities
and Rental Activities, later.
For more information, see Pub.
925, Passive Activity and At-Risk
Rules.
Note. Corporations subject to the
passive activity rules must use Form
Mar 28, 2012

Overview of Form

The form contains six parts. The
Specific Instructions include, at the
beginning of the instructions for each
part, a brief explanation of the
purpose or use of that part. These
explanations give a general overview
of how the form works.
Also, as you read the instructions
that follow, see Example of How To
Complete Form 8582-CR. The
example goes through a six-step
analysis of how the form and
worksheets are completed for a
partner in a limited partnership that
has a low-income housing credit.

Activities That Are Not
Passive Activities

The following are not passive
activities.
1. Trade or business activities in
which you materially participated for
the tax year.
2. Any rental real estate activity in
which you materially participated if
you were a “real estate professional”
for the tax year. You were a real
estate professional only if:
a. More than half of the personal
services you performed in trades or
businesses during the tax year were
performed in real property trades or
businesses in which you materially
participated, and
b. You performed more than 750
hours of services during the tax year
in real property trades or businesses
in which you materially participated.
For purposes of item (2), each
interest in rental real estate is a
separate activity unless you elect to
treat all interests in rental real estate
as one activity.
Cat. No. 64649B

If you are married filing jointly, one
spouse must separately meet both
(2)(a) and (2)(b) without taking into
account services performed by the
other spouse.
A real property trade or business is
any real property development,
redevelopment, construction,
reconstruction, acquisition,
conversion, rental, operation,
management, leasing, or brokerage
trade or business.
Services you performed as an
employee are not treated as
performed in a real property trade or
business unless you owned more
than 5% of the stock (or more than
5% of the capital or profits interest) in
the employer.
3. A working interest in an oil or
gas well. Your working interest must
be held directly or through an entity
that does not limit your liability (such
as a general partner interest in a
partnership). In this case, it does not
matter whether you materially
participated in the activity for the tax
year.
If, however, your liability was
limited for part of the year (for
example, you converted your general
partner interest to a limited partner
interest during the year), some of
your income and losses from the
working interest may be treated as
passive activity gross income and
passive activity deductions. See
Temporary Regulations section
1.469-1T(e)(4)(ii).
4. The rental of a dwelling unit you
used as a residence if section
280A(c)(5) applies. This section
applies if you rented out a dwelling
unit that you also used as a home
during the year for a number of days
that exceeds the greater of 14 days
or 10% of the number of days during
the year that the home was rented at
a fair rental.
5. An activity of trading personal
property for the account of owners of
interests in the activity. For purposes
of this rule, personal property means
property that is actively traded, such
as stocks, bonds, and other
securities. See Temporary
Regulations section 1.469-1T(e)(6).

Generally, credits from these
activities are not entered on Form
8582-CR. However, credits from
these activities may be subject to
limitations other than the passive
credit limitation rules.

Rental Activities

A rental activity is a passive activity
even if you materially participated in
the activity (unless it is a rental real
estate activity in which you materially
participated and you were a real
estate professional).
However, if you meet any of the
five exceptions listed below, the
rental of the property is not treated as
a rental activity. See Reporting
Credits From the Activities, later, if
you meet any of the exceptions.
An activity is a rental activity if
tangible property (real or personal) is
used by customers or held for use by
customers and the gross income (or
expected gross income) from the
activity represents amounts paid (or
to be paid) mainly for the use of the
property. It does not matter whether
the use is under a lease, a service
contract, or some other arrangement.

Exceptions

An activity is not a rental activity if
any of the following exceptions are
met.
1. The average period of customer
use is:
a. 7 days or less, or
b. 30 days or less and significant
personal services were provided in
making the rental property available
for customer use.
Figure the average period of
customer use for a class of property
by dividing the total number of days in
all rental periods by the number of
rentals during the tax year. If the
activity involves renting more than
one class of property, multiply the
average period of customer use of
each class by the ratio of the gross
rental income from that class to the
activity’s total gross rental income.
The activity’s average period of
customer use equals the sum of
these class-by-class average periods
weighted by gross income. See
Regulations section 1.469-1(e)(3)(iii).
Significant personal services
include only services performed by
individuals. To determine if personal
services are significant, all relevant
facts and circumstances are
considered. Facts and circumstances
include the frequency of the services,
the type and amount of labor required
to perform the services, and the value
of the services relative to the amount
charged for use of the property.
2. Extraordinary personal services
were provided in making the rental
property available for customer use.
This applies only if the services are

performed by individuals and the
customers’ use of the rental property
is incidental to their receipt of the
services.
3. Rental of the property is
incidental to a nonrental activity.
The rental of property is incidental
to an activity of holding property for
investment if the main purpose of
holding the property is to realize a
gain from its appreciation and the
gross rental income is less than 2%
of the smaller of the unadjusted basis
or the fair market value (FMV) of the
property.
Unadjusted basis is the cost of the
property without regard to
depreciation deductions or any other
basis adjustment described in section
1016.
The rental of property is incidental
to a trade or business activity if:
a. You own an interest in the trade
or business activity during the tax
year,
b. The rental property was mainly
used in the trade or business activity
during the tax year or during at least
2 of the 5 preceding tax years, and
c. The gross rental income from
the property is less than 2% of the
smaller of the unadjusted basis or the
FMV of the property.
Lodging provided for the
employer’s convenience to an
employee or the employee’s spouse
or dependents is incidental to the
activity or activities in which the
employee performs services.
4. You customarily make the
rental property available during
defined business hours for
nonexclusive use by various
customers.
5. You provide property for use in
a nonrental activity of a partnership, S
corporation, or joint venture in your
capacity as an owner of an interest in
the partnership, S corporation, or joint
venture.

participate, report the credits from the
activity on the forms you normally
use.
If the rental activity did not meet
any of the five exceptions, it is
generally a passive activity. Special
rules apply if you conduct the rental
activity through a publicly traded
partnership (PTP). See Publicly
Traded Partnerships (PTPs), later.
If the rental activity is not
conducted through a PTP, the
passive rental activity is entered in
Worksheet 1, 2, 3, or 4.
Worksheet 1 is for credits (other
than rehabilitation credits and
low-income housing credits) from
passive rental real estate activities in
which you actively participated. See
Special Allowance for Rental Real
Estate Activities, later.
Worksheet 2 is for rehabilitation
credits from passive rental real estate
activities and low-income housing
credits for property placed in service
before 1990. This worksheet is also
used for low-income housing credits
from a partnership, S corporation, or
other pass-through entity if your
interest in the pass-through entity
was acquired before 1990, regardless
of the date the property was placed in
service.
Worksheet 3 is for low-income
housing credits for property placed in
service after 1989 (unless held
through a pass-through entity in
which you acquired your interest
before 1990).
Worksheet 4 is for credits from
passive trade or business activities in
which you did not materially
participate and passive rental real
estate activities in which you did not
actively participate (but not
rehabilitation credits from passive
rental real estate activities or
low-income housing credits).

Reporting Credits
From the Activities

If you actively participated in a
passive rental real estate activity, you
may be able to claim credits from the
activity for the tax attributable to a
special allowance of up to $25,000,
reduced by any passive losses,
including the commercial
revitalization deduction, allowed
under this exception on Form 8582,
Passive Activity Loss Limitations.
The special allowance also applies
to low-income housing credits and
rehabilitation credits from a rental real
estate activity, even if you did not
actively participate in the activity. The
credits allowed under the special
allowance are in addition to the
credits allowed for the tax attributable
to net passive income.
The special allowance is not
available if you were married at the

If an activity meets any of the five
exceptions listed above, it is not a
rental activity. You must then
determine:
1. Whether your rental of the
property is a trade or business activity
(see Trade or Business Activities,
later) and, if so,
2. Whether you materially
participated in the activity for the tax
year (see Material Participation,
later).

• If the activity is a trade or business

activity in which you did not materially
participate, enter the credits from the
activity on Worksheet 4, later.
• If the activity is a trade or business
activity in which you did materially
-2-

Special Allowance for
Rental Real Estate Activities

Instructions for Form 8582-CR (Rev. 01-2012)

end of the year, are filing a separate
return for the year, and lived with your
spouse at any time during the year.
Only an individual, a qualifying
estate, or a qualified revocable trust
that made an election to treat the
trust as part of the decedent’s estate
may actively participate in a rental
real estate activity. Unless future
regulations provide an exception,
limited partners are not treated as
actively participating in a
partnership’s rental real estate
activity.
A qualifying estate is the estate of
a decedent for tax years ending less
than 2 years after the date of the
decedent’s death if the decedent
would have satisfied the active
participation requirements for the
rental real estate activity for the tax
year the decedent died.
A qualified revocable trust may
elect to be treated as part of a
decedent’s estate for purposes of the
special allowance for active
participation in rental real estate
activities. The election must be made
by both the executor (if any) of the
decedent’s estate and the trustee of
the revocable trust. For details, see
Regulations section 1.645-1.
You are not considered to actively
participate in a rental real estate
activity if at any time during the tax
year your interest (including your
spouse’s interest) in the activity was
less than 10% (by value) of all
interests in the activity.
Active participation is a less
stringent requirement than material
participation (see Material
Participation, later). You may be
treated as actively participating if, for
example, you participated in making
management decisions or arranging
for others to provide services (such
as repairs) in a significant and bona
fide sense. Management decisions
that may count as active participation
include:
• Approving new tenants,
• Deciding on rental terms,
• Approving capital or repair
expenditures, and
• Other similar decisions.
The maximum special allowance is:
• $25,000 for single individuals and
married individuals filing a joint return
for the tax year.
• $12,500 for married individuals
who file separate returns for the tax
year and who lived apart from their
spouses at all times during the tax
year.
• $25,000 for a qualifying estate
reduced by the special allowance for
which the surviving spouse qualified.
Modified adjusted gross income
limitation. If your modified adjusted
gross income (defined in the
instructions, later) is $100,000 or less

($50,000 or less if married filing
separately), figure your credits based
on the amount of the maximum
special allowance referred to in the
preceding paragraph.
If your modified adjusted gross
income is more than $100,000
($50,000 if married filing separately)
but less than $150,000 ($75,000 if
married filing separately), your
special allowance is limited to 50% of
the difference between $150,000
($75,000 if married filing separately)
and your modified adjusted gross
income.
Generally, if your modified
adjusted gross income is $150,000 or
more ($75,000 or more if married
filing separately), there is no special
allowance.
However, for low-income housing
credits for property placed in service
before 1990 and for rehabilitation
credits, the limits on modified
adjusted gross income are increased.
If your modified adjusted gross
income is more than $200,000
($100,000 if married filing separately)
but less than $250,000 ($125,000 if
married filing separately), your
special allowance is limited to 50% of
the difference between $250,000
($125,000 if married filing separately)
and your modified adjusted gross
income.
If your modified adjusted gross
income is $250,000 or more
($125,000 or more if married filing
separately), there is no special
allowance.
No modified adjusted gross
income limitation applies when
figuring the special allowance for
low-income housing credits for
property placed in service after 1989
(other than from a pass-through entity
in which you acquired your interest
before 1990).

Trade or Business
Activities

A trade or business activity is an
activity (other than a rental activity or
an activity treated as incidental to an
activity of holding property for
investment) that:
1. Involves the conduct of a trade
or business (within the meaning of
section 162),
2. Is conducted in anticipation of
starting a trade or business, or
3. Involves research or
experimental expenditures deductible
under section 174 (or that would be if
you chose to deduct rather than
capitalize them).

Instructions for Form 8582-CR (Rev. 01-2012)

-3-

Reporting Credits
From the Activities
Trade or business activities with
material participation. If you
materially participated in a trade or
business activity, the activity is not a
passive activity. Report the credits
from the activity on the forms you
normally use.
Trade or business activities
without material participation. If
you did not materially participate in a
trade or business activity, the activity
is a passive activity. Generally, you
must use Worksheet 4, later, to figure
the amount to enter on Form
8582-CR for each trade or business
activity in which you did not materially
participate. However, if you held the
activity through a PTP, special rules
apply. See Publicly Traded
Partnerships (PTPs), later.

Material Participation

For the material participation tests
that follow, participation generally
includes any work done in connection
with an activity if you owned an
interest in the activity at the time you
did the work. The capacity in which
you did the work does not matter.
However, work is not participation if:
• It is not work that an owner would
customarily do in the same type of
activity, and
• One of your main reasons for doing
the work was to avoid the
disallowance of losses or credits from
the activity under the passive activity
rules.
Proof of participation. You may
prove your participation in an activity
by any reasonable means. You do
not have to maintain
contemporaneous daily time reports,
logs, or similar documents if you can
establish your participation by other
reasonable means. For this purpose,
reasonable means include, but are
not limited to, identifying services
performed over a period of time and
the approximate number of hours
spent performing the services during
that period, based on appointment
books, calendars, or narrative
summaries.
Tests for individuals. You
materially participated for the tax year
in an activity if you satisfy at least one
of the following tests.
1. You participated in the activity
for more than 500 hours.
2. Your participation in the activity
for the tax year was substantially all
of the participation in the activity of all
individuals (including individuals who
did not own any interest in the
activity) for the year.
3. You participated in the activity
for more than 100 hours during the
tax year, and you participated at least
as much as any other individual

(including individuals who did not own
any interest in the activity) for the
year.
4. The activity is a significant
participation activity for the tax year,
and you participated in all significant
participation activities during the year
for more than 500 hours.
A significant participation activity
is any trade or business activity in
which you participated for more than
100 hours during the year and in
which you did not materially
participate under any of the material
participation tests (other than this
fourth test).
5. You materially participated in
the activity for any 5 (whether or not
consecutive) of the 10 immediately
preceding tax years.
6. The activity is a personal
service activity in which you
materially participated for any 3
(whether or not consecutive)
preceding tax years.
An activity is a personal service
activity if it involves the performance
of personal services in the fields of
health, law, engineering, architecture,
accounting, actuarial science,
performing arts, consulting, or in any
other trade or business in which
capital is not a material incomeproducing factor.
7. Based on all the facts and
circumstances, you participated in the
activity on a regular, continuous, and
substantial basis during the tax year.
You did not materially participate in
the activity under this seventh test,
however, if you participated in the
activity for 100 hours or less during
the tax year.
Your participation in managing the
activity does not count in determining
whether you materially participated
under this test if:
a. Any person (except you)
received compensation for performing
services in the management of the
activity, or
b. Any individual spent more
hours during the tax year performing
services in the management of the
activity than you did (regardless of
whether the individual was
compensated for the management
services).

activity. For purposes of this test,
work done as an investor includes:
1. Studying and reviewing
financial statements or reports on
operations of the activity,
2. Preparing or compiling
summaries or analyses of the
finances or operations of the activity
for your own use, and
3. Monitoring the finances or
operations of the activity in a
nonmanagerial capacity.

Test for a spouse. Participation by
your spouse during the tax year in an
activity you own may be counted as
your participation in the activity, even
if your spouse did not own an interest
in the activity and whether or not you
and your spouse file a joint return for
the tax year.

Grouping of Activities

Test for investors. Work done as
an investor in an activity is not treated
as participation unless you were
directly involved in the day-to-day
management or operations of the

Special rules for limited partners.
If you were a limited partner in an
activity, you generally did not
materially participate in the activity.
You did materially participate in the
activity, however, if you met material
participation test 1, 5, or 6 (see Tests
for individuals, earlier) for the tax
year.
However, for purposes of the
material participation tests, you are
not treated as a limited partner if you
also were a general partner in the
partnership at all times during the
partnership’s tax year ending with or
within your tax year (or, if shorter,
during the portion of the partnership’s
tax year in which you directly or
indirectly owned your limited partner
interest).
A limited partner’s share of an
electing large partnership’s taxable
income or loss from all trade or
business and rental activities is
treated as income or loss from the
conduct of a single passive trade or
business activity.
Special rules for certain retired or
disabled farmers and surviving
spouses of farmers. Certain
retired or disabled farmers and
surviving spouses of farmers are
treated as materially participating in a
farming activity if the real property
used in the activity meets the estate
tax rules for special valuation of farm
property passed from a qualifying
decedent. See Temporary
Regulations section 1.469-5T(h)(2).
Estates and trusts. The PAC
limitations apply to an estate or trust.
See Temporary Regulations sections
1.469-1T(b)(2) and (3). The rules for
determining material participation for
this purpose have not yet been
issued.
Generally, one or more trade or
business activities or rental activities
may be treated as a single activity if
the activities make up an appropriate
economic unit for the measurement of
gain or loss under the passive activity
rules.
Whether activities make up an
appropriate economic unit depends
on all the relevant facts and
circumstances. The factors given the
greatest weight in determining
-4-

whether activities make up an
appropriate economic unit are:
1. Similarities and differences in
types of trades or businesses,
2. The extent of common control,
3. The extent of common
ownership,
4. Geographical location, and
5. Interdependencies between or
among the activities.
Example. You have a significant
ownership interest in a bakery and a
movie theater in Baltimore and in a
bakery and a movie theater in
Philadelphia. Depending on all the
relevant facts and circumstances,
there may be more than one
reasonable method for grouping your
activities. For instance, the following
groupings may or may not be
permissible.
• A single activity.
• A movie theater activity and a
bakery activity.
• A Baltimore activity and a
Philadelphia activity.
• Four separate activities.
Once you choose a grouping
under these rules, you must continue
using that grouping in later tax years
unless a material change in the facts
and circumstances makes it clearly
inappropriate.
The IRS may regroup your
activities if your grouping fails to
reflect one or more appropriate
economic units and one of the
primary purposes of your grouping is
to avoid the passive activity
limitations.
Limitation on grouping certain
activities. The following activities
may not be grouped together.
1. A rental activity with a trade or
business activity unless the activities
being grouped together make up an
appropriate economic unit and:
a. The rental activity is
insubstantial relative to the trade or
business activity or vice versa, or
b. Each owner of the trade or
business activity has the same
proportionate ownership interest in
the rental activity. If so, the portion of
the rental activity involving the rental
of property used in the trade or
business activity may be grouped
with the trade or business activity.
2. An activity involving the rental
of real property with an activity
involving the rental of personal
property (except personal property
provided in connection with the real
property or vice versa).
3. Any activity with another activity
in a different type of business and in
which you hold an interest as a
limited partner or as a limited
entrepreneur (as defined in section
464(e)(2)), if that other activity
engages in holding, producing, or
distributing motion picture films or

Instructions for Form 8582-CR (Rev. 01-2012)

videotapes; farming; leasing section
1245 property; or exploring for (or
exploiting) oil and gas resources or
geothermal deposits.
Activities conducted through
partnerships, S corporations, and
C corporations subject to section
469. Once a partnership or
corporation determines its activities
under these rules, a partner or
shareholder may use these rules to
group those activities with:
• Each other,
• Activities conducted directly by the
partner or shareholder, or
• Activities conducted through other
partnerships and corporations.
A partner or shareholder may not
treat as separate activities those
activities grouped together by the
partnership or corporation.
Partial disposition of an activity.
You may treat the disposition of
substantially all of an activity as a
separate activity if you can prove with
reasonable certainty:
1. The prior year unallowed
losses, if any, allocable to the part of
the activity disposed of, and
2. The net income or loss for the
year of disposition allocable to the
part of the activity disposed of.

Disclosure Requirement

For tax years beginning after January
24, 2010, the following disclosure
requirements for groupings apply.
You are required to report certain
changes to your groupings that occur
during the tax year to the IRS. If you
fail to report these changes, each
trade or business activity or rental
activity will be treated as a separate
activity. You will be considered to
have made a timely disclosure if you
filed all affected income tax returns
consistent with the claimed grouping
and make the required disclosure on
the income tax return for the year in
which you first discovered the failure
to disclose. If the IRS discovered the
failure to disclose, you must have
reasonable cause for not making the
required disclosure. For more
information on disclosure
requirements, see Revenue
Procedure 2010-13 available at www.
irs.gov/irb/2010-04_IRB/ar15.html.
New grouping. You must file a
written statement with your original

income tax return for the first tax year
in which two or more activities are
originally grouped into a single
activity. The statement must provide
the names, addresses, and employer
identification numbers (EINs), if
applicable, for the activities being
grouped as a single activity. In
addition, the statement must contain
a declaration that the grouped
activities make up an appropriate
economic unit for the measurement of
gain or loss under the passive activity
rules.
Addition to an existing grouping.
You must file a written statement with
your original income tax return for the
tax year in which you add a new
activity to an existing group. The
statement must provide the name,
address, and EIN, if applicable, for
the activity that is being added and
for the activities in the existing group.
In addition, the statement must
contain a declaration that the
activities make up an appropriate
economic unit for the measurement of
gain or loss under the passive activity
rules.
Regrouping. You must file a written
statement with your original income
tax return for the tax year in which
you regroup the activities. The
statement must provide the names,
addresses, and EINs, if applicable,
for the activities that are being
regrouped. If two or more activities
are being regrouped into a single
activity, the statement must contain a
declaration that the regrouped
activities make up an appropriate
economic unit for the measurement of
gain or loss under the passive activity
rules. In addition, the statement must
contain an explanation of why the
original grouping was clearly
inappropriate or the nature of the
material change in the facts and
circumstances that made the original
grouping clearly inappropriate.

Dispositions

Unallowed PACs, unlike unallowed
passive activity losses, are not
allowed when you dispose of your
interest in an activity. However, you
may elect to increase the basis of the
credit property by the amount of the
original basis reduction of the
property to the extent that the credit
has not been allowed under the
passive activity rules. Unallowed

Instructions for Form 8582-CR (Rev. 01-2012)

-5-

PACs that are not used to increase
the basis of the credit property are
carried forward until they are allowed.
To make the election, complete Form
8582-CR, Part VI. No basis
adjustment may be elected on a
partial disposition of your interest in a
passive activity.

Example of How To
Complete Form 8582-CR

Note. For tax years beginning after
2011, line numbers on the referenced
forms may change. See the form
instructions for the referenced forms
on how to report the passive activity
credit.
In 2011, John Jones purchased an
interest as a limited partner in
Partnership A (which was an eligible
small business). Mr. Jones is married
and files a joint return. During 2011,
the partnership placed in service a
residential rental building that
qualified for the low-income housing
credit. He has no other general
business credits.
• Mr. Jones received a Schedule K-1
(Form 1065) from the partnership.
The low-income housing credit
($12,000) is shown on Schedule K-1,
box 15 with code D.
• Mr. Jones’s net passive income for
2011 is zero.
• Mr. Jones will need the following
forms to figure the low-income
housing credit.
1. Form 8586, Low-Income
Housing Credit (not illustrated).
2. Form 3800, General Business
Credit (not illustrated).
3. Form 8582-CR, Passive
Activity Credit Limitations.
Step 1. Mr. Jones follows the
instructions for code D on Schedule
K-1, box 15, and enters the $12,000
low-income housing credit on lines 11
and 12 of Form 8586 and carries over
the total to Form 3800, Part III, line
4d.
Step 2. Mr. Jones checks Box F in
Part III of Form 3800 and brings the
$12,000 credit from the passive
activity to line 32.
Step 3. Line 33 of Form 3800 asks
for the passive activity low-income
housing credit for 2011. The amount
is figured on Form 8582-CR and the
worksheets. Worksheet 3 of Form
8582-CR is used for the post-1989
low-income housing credits.

Worksheet 3 for Lines 3a and 3b
Name of Activity

Partnership A

(keep for your records)
From
Form

Current Year
Credits
(a) Credit line 3a

8586/3800, line 32

Prior Year
Unallowed Credits

Total Credits

(b) Credit line 3b

(c) Add cols. (a) and (b)

12,000

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

12,000

-6-

Instructions for Form 8582-CR (Rev. 01-2012)

Step 4. Mr. Jones follows the instructions for Worksheet 3 and enters the total credits from column (a) of that worksheet on Form 8582-CR,
line 3a. He enters the total credits on line 3c and completes lines 5 through 7. 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 credit. He must also complete the computation for line 35 in the instructions to
get the amount to enter on line 35 of the form.
Form

8582-CR

Passive Activity Credit Limitations

(Rev. January 2012)
Department of the Treasury
Internal Revenue Service
Name(s) shown on return

▶ See

OMB No. 1545-1034

separate instructions.

▶ Attach

Attachment
Sequence No. 89

to Form 1040 or 1041.

Identifying number

John and Mary Jones
Part I
Passive Activity Credits

123-00-4567

Caution: If you have credits from a publicly traded partnership, see Publicly Traded Partnerships (PTPs) in 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 in the instructions.)
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 . . . . . . . . . . . . . . . . . . . . . . . . .
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 in the instructions.)
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 . . . . . . . . . . . . . . . . . . . . . . . . .
Low-Income Housing Credits for Property Placed in Service After 1989 (See Lines 3a through 3c
in the instructions.)

12,000
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 . . . . . . . . . . . . . . . . . . . . . . . . .
All Other Passive Activity Credits (See Lines 4a through 4c in the instructions.)
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 . . . . . . . . . . . . . . . . . . . . . . . . .
5 Add lines 1c, 2c, 3c, and 4c . . . . . . . . . . . . . . . . . . . . . . .
6 Enter the tax attributable to net passive income (see instructions) . . . . . . . . . .
7 Subtract line 6 from line 5. If line 6 is more than or equal to line 5, enter -0- and see instructions
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.

Part IV

1c

2c

3c

12,000

4c
5
6
7

12,000
-012,000

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
32
33
34
35
36

If you completed Part III, enter the amount from line 19. Otherwise, subtract line 16 from line 7 .
Enter the amount from line 30 . . . . . . . . . . . . . . . . . . . . . .
Subtract line 32 from line 31. If zero, enter -0- here and on line 36 . . . . . . . . . .
Enter the smaller of line 3c or line 33 . . . . . . . . . . . . . . . . . . . .
Tax attributable to the remaining special allowance (see instructions) . . . . . . . . .
Enter the smaller of line 34 or line 35 . . . . . . . . . . . . . . . . . . . .

Instructions for Form 8582-CR (Rev. 01-2012)

-7-

31
32
33
34
35
36

12,000
-012,000
12,000
8,250
8,250

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

305,000

A. Taxable income

B. Tax on line A. For Form 1040, use the Tax Table, Tax Computation Worksheet, or other appropriate method you used to figure your
tax. For Form 1041, use the Tax Rate Schedules, the Qualified Dividends Tax Worksheet, or Schedule D, whichever applies
C. Enter $25,000 ($12,500 if married filing separate return and you and your spouse lived apart at
all times during the year)
D. Enter amount, if any, from Form 8582, line 10
E. Enter amount, if any, from Form 8582, line 14

78,105

25,000
-0-025,000
280,000

F. Subtract lines D and E from line C
G. Subtract line F from line A

H. Tax on line G. For Form 1040, use the Tax Table, Tax Computation Worksheet, or other appropriate method you used to figure your
tax. For Form 1041, use the Tax Rate Schedules, the Qualified Dividends Tax Worksheet, or Schedule D, whichever applies
I. Subtract line H from line B
J. Add lines 16 and 30 of Form 8582-CR and enter the total
K. Tax attributable to the remaining special allowance. Subtract line J from line I. Enter the result on Form 8582-CR, line 35

69,855
8,250
-08,250

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.

Step 5. Mr. Jones completes Form 8582-CR, Part V.

Part V
37

Passive Activity Credit Allowed

Passive Activity Credit Allowed. Add lines 6, 16, 30, and 36. See instructions 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) in the instructions.

37

8,250

Step 6. 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 2011 is the amount on line 37, or $8,250. His unallowed credit of $3,750 is
determined by subtracting the allowed credit on line 37 from the total credit on line 5 ($12,000 – $8,250).
Step 7. Mr. Jones enters the allowed passive activity credit of $8,250 on Form 3800, line 33, and completes the rest of that form according to
the instructions for Form 3800. The unallowed credit of $3,750 is carried forward and used to figure the passive activity credit allowed for 2012.

-8-

Instructions for Form 8582-CR (Rev. 01-2012)

Specific Instructions
Current Year Credits

Convert any current year qualified
expenditures into credits before
beginning Worksheet 1, 2, 3, or 4. If
the credits are from more than one
activity or are of more than one type,
separate the credits by activity and by
type before making entries in the
worksheets.
For tax years beginning after
2011, line numbers on the
CAUTION referenced forms may
change. See the form instructions for
the referenced forms on how to report
the current year passive activity
credit.
Example. You have a low-income
housing credit from one activity and a
research credit from a different
activity. Enter the low-income housing
credit in column (a) of Worksheet 2 or
3 and make a separate entry for the

!

research credit in column (a) of
Worksheet 4.
Form 3800, General Business
Credit. Enter the credits from Form
3800, line 2, line 23, and line 32, in
column (a) of Worksheet 1, 2, 3, or 4.
Form 8834, Qualified Plug-In
Electric and Electric Vehicle Credit.
See the Instructions for Form 8834
for the amount to enter in column (a)
of Worksheet 1 or 4.

Prior Year Unallowed
Credits

To figure this year’s PAC, you must
take into account any credits from
passive activities disallowed for prior
years and carried forward to this year.
If you had only one type of prior
year unallowed credit from a single
passive activity, figure your prior year
unallowed credit by subtracting line
37 of your prior year Form 8582-CR
from line 5 of your prior year Form
8582-CR.

Otherwise, your prior year
unallowed credits are the amounts
shown in column (b) of Worksheet 9
in the prior year Instructions for Form
8582-CR. Enter the prior year
unallowed credits in column (b) of
Worksheet 1, 2, 3, or 4, whichever
applies.
You must adjust a prior year
unallowed credit if you had to
CAUTION recapture any part of the
credit (for example, due to the early
disposition of property) or transfer the
credit to a bankruptcy estate.

!

Part I—Passive Activity
Credits

Use Part I to combine your credits
from passive activities to determine if
you have a PAC for the current year.
If your credits from all passive
activities exceed the tax attributable
to net passive income, you have a
PAC for the current year. Generally,

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, earlier, for a definition of active participation.
For credits from Form 3800, enter the source form (for example, Form 3468 or Form 6765) and “Form 3800, line” followed by the
appropriate line number (2, 23, or 32) in the “From Form” column.
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
Name of Activity

(keep for your records)
From
Form

Current Year
Credits

Prior Year
Unallowed Credits

Total Credits

(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 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 this worksheet if you do not meet both requirements.
Enter the source form (Form 3468 or Form 8586) and “Form 3800, line” followed by the appropriate line number (2, 23, or 32) in the
“From Form” column.
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
Name of Activity

(keep for your records)
From
Form

Current Year
Credits

Prior Year
Unallowed Credits

Total Credits

(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

Instructions for Form 8582-CR (Rev. 01-2012)

-9-

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.
Enter “Form 3800, line” followed by the appropriate line number (2, 23, or 32) in the “From Form” column.
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.

Worksheet 3 for Lines 3a and 3b

(keep for your records)
From
Form

Name of Activity

Current Year
Credits

Prior Year
Unallowed Credits

Total Credits

(a) Credit line 3a

(b) Credit line 3b

(c) Add cols. (a) and (b)

Totals. Enter on lines 3a and 3b of Form 8582-CR
Lines 4a and 4b. Use Worksheet 4 to figure the amounts to enter on lines 4a and 4b. Use line 4a for all other passive activity credits for
the current year and line 4b for prior year unallowed credits from those activities.
For credits from Form 3800, enter the source form (for example, Form 3468 or Form 6765) and “Form 3800, line” followed by the
appropriate line number (2, 23, or 32) in the “From Form” column.
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)
From
Form

Name of Activity

Current Year
Credits

Prior Year
Unallowed Credits

Total Credits

(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

you have net passive income if line 4
of Form 8582 shows income. For
more information, see the instructions
for Form 8582-CR, line 6.
Lines 1a through 1c. Individuals
and qualifying estates that actively
participated in rental real estate
activities must include the credits
(other than rehabilitation credits or
low-income housing credits) from
these activities on lines 1a through
1c. Use Worksheet 1 to figure the
amounts to enter on lines 1a and 1b.
See Special Allowance for Rental
Real Estate Activities, earlier.
If you are married filing a
separate return and lived with
CAUTION your spouse at any time
during the year, even if you actively
participated in the rental real estate
activity, include the credits in
Worksheet 4, not in Worksheet 1.
Note. You may take credits that
arose in a prior tax year (other than
low-income housing and rehabilitation
credits) under the special allowance
only if you actively participated in the
rental real estate activity for both that
prior year and this year. If you did not

!

actively participate for both years,
include the credits in Worksheet 4,
not in Worksheet 1.
Lines 2a through 2c. Individuals
(including limited partners) and
qualifying estates who had
rehabilitation credits from rental real
estate activities or low-income
housing credits for property placed in
service before 1990 must include the
credits from those activities on lines
2a through 2c. Use Worksheet 2 to
figure the amounts to enter on lines
2a and 2b.
If you have low-income housing
credits for property placed in service
after 1989, include those credits in
Worksheet 3 instead of Worksheet 2.
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.
Lines 3a through 3c. Individuals
(including limited partners) and
qualifying estates who had
low-income housing credits from
rental real estate activities for
-10-

property placed in service after 1989
must include those credits on lines 3a
through 3c. If you held an indirect
interest in the property through a
partnership, S corporation, or other
pass-through entity, use lines 3a
through 3c only if you also acquired
your interest in the pass-through
entity after 1989. Use Worksheet 3 to
figure the amounts to enter on lines
3a and 3b.
Include the credits in
Worksheet 4, but not in
CAUTION Worksheet 2 or 3, if you are
married filing a separate return and
lived with your spouse at any time
during the year.
Lines 4a through 4c. Individuals
must include on lines 4a through 4c
credits from passive activities that
were not entered on Worksheets 1, 2,
or 3. Trusts must include credits from
all passive activities in Worksheet 4.
Use Worksheet 4 to figure the
amounts to enter on lines 4a and 4b.
Line 6. If Form 8582, line 4, shows
net income or you did not complete
Form 8582 because you had net
passive income, you must figure the

!

Instructions for Form 8582-CR (Rev. 01-2012)

tax on the net passive income. If you
have an overall loss on an entire
disposition of your interest in a
passive activity, reduce net passive
income, if any, on Form 8582, line 4,
to the extent of the loss (but not
below zero) and use only the
remaining net passive income in the
computation below. If you had a net
passive activity loss, enter -0- on line
6 and go to line 7.
Figure the tax on net passive
income as follows.
A. Taxable income
including net
passive income . . . . .
B. Tax on line A* . . . . . . . . . . . . . .
C. Taxable income without
net passive income . . .
D. Tax on line C* . . . . . . . . . . . . . .
E. Subtract line D from line B
and enter the result on
Form 8582-CR, line 6 . . . . . . . . .
* For Form 1040, use the Tax Table, Tax Computation
Worksheet, or other appropriate method you used to
figure your tax. For Form 1041, use the Tax Rate
Schedule, Qualified Dividends Tax Worksheet, or
Schedule D, whichever applies.

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.
Line 7. If line 7 is zero because the
tax on the net passive income on line
6 is greater than your credits from
passive activities on line 5, all your
credits from passive activities are
allowed. In this case, enter the
amount from line 5 on line 37 and
report the credits on the forms
normally used. Do not complete
Worksheets 5 through 9.

Part II—Special
Allowance for Rental
Real Estate Activities
With Active Participation
Married persons filing
separate returns who lived
CAUTION with their spouses at any time
during the year are not eligible to
complete Part II.
Use Part II to figure the credit
allowed if you have any credits from

!

rental real estate activities in which
you actively participated (other than
rehabilitation credits and low-income
housing credits). See Rental
Activities, earlier, for details.
Line 9. Married persons filing
separate returns who lived apart from
their spouses at all times during the
year must enter $75,000 on line 9
instead of $150,000. Married persons
filing separate returns who lived with
their spouses at any time during the
year are not eligible for the special
allowance. They must enter -0- on
line 16 and go to line 17.
Line 10. To figure modified adjusted
gross income, combine all the
amounts used to figure adjusted
gross income except do not take into
account:
• Any passive activity loss as defined
in section 469(d)(1),
• Any rental real estate loss allowed
to real estate professionals (defined
under Activities That Are Not Passive
Activities, earlier),
• Any overall loss from a PTP,
• The taxable amount of social
security and tier 1 railroad retirement
benefits,
• Deductible contributions to
traditional individual retirement
accounts (IRAs) and section
501(c)(18) pension plans,
• The domestic production activities
deduction,
• The deduction allowed for
self-employment taxes,
• The exclusion from income of
interest from series EE and I U.S.
savings bonds used to pay higher
education expenses,
• The exclusion of amounts received
under an employer’s adoption
assistance program,
• The student loan interest
deduction, or
• The tuition and fees deduction.
Include in modified adjusted gross
income any portfolio income and
expenses that are clearly and directly
allocable to portfolio income. Also
include any income that is treated as
nonpassive income, such as overall
gain from a PTP and net income from
an activity or item of property subject
to the recharacterization of passive

Instructions for Form 8582-CR (Rev. 01-2012)

-11-

income rules. For information on
recharacterization of income, see
Pub. 925 or Temporary Regulations
section 1.469-2T(f).
When figuring modified adjusted
gross income, any overall loss from
an entire disposition of an interest in
a passive activity is taken into
account as a nonpassive loss if you
do not have any net passive income
after combining net income and
losses from all other passive activities
(that is, Form 8582, line 4 is a loss or
zero). If you do have net passive
income when you combine the net
losses and net income from all other
passive activities, the overall loss
from the disposition is taken into
account as a nonpassive loss only to
the extent that it exceeds that net
passive income.
Line 12. Do not enter more than
$12,500 on line 12 if you are married
filing a separate return and you and
your spouse lived apart at all times
during the year. Married persons filing
separate returns who lived with their
spouses at any time during the year
are not eligible for the special
allowance. They must enter -0- on
line 16 and go to line 17.
Line 15. Figure the tax attributable
to the amount on line 14 as follows.
A. Taxable income . . . . . . .
B. Tax on line A* . . . . . . . . . . . . . .
C. Enter amount from Form
8582-CR, line 14 . . . . . .
D. Subtract line C from line
A ................
E. Tax on line D* . . . . . . . . . . . . . .
F. Subtract line E from line B
and enter the result on
Form 8582-CR, line 15 . . . . . . . .

* For Form 1040, use the Tax Table, Tax Computation
Worksheet, or other appropriate method you used to
figure your tax. For Form 1041, use the Tax Rate
Schedule, Qualified Dividends Tax Worksheet, or
Schedule D, whichever applies.

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.

Instructions for Worksheet 5
Complete Worksheet 5 if you have an amount on Form 8582-CR, line 1c and you have credits from more than one activity. For credits
to be reported on Form 3800, enter “Form 3800, line” followed by the appropriate line number (3, 24, or 33).
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 Form 8582-CR, line 16 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 Form 8582-CR, line 2c or 3c.

Worksheet 5 for Credits on Line 1a or 1b
Name of Activity

Form To Be
Reported on

(keep for your records)
(a) Credits

Totals

(b) Ratios

(c) Special
Allowance

(d) Subtract
column (c) from
column (a)

1.00

Instructions for Worksheet 6
Complete Worksheet 6 if you have an amount on Form 8582-CR, line 2c and you have credits from more than one activity. For credits
to be reported on Form 3800, enter “Form 3800, line” followed by the appropriate line number (3, 24, or 33).
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 Form 8582-CR, line 30 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
Name of Activity

Form To Be
Reported on

(keep for your records)
(a) Credits

Totals

(b) Ratios

(c) Special
Allowance

(d) Subtract
column (c) from
column (a)

1.00

-12-

Instructions for Form 8582-CR (Rev. 01-2012)

Instructions for Worksheet 7
Complete Worksheet 7 if you have credits on Form 8582-CR, line 3c 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 Form 8582-CR, line 36 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.

(keep for your records)

Worksheet 7 for Credits on Line 3a or 3b
Name of Activity

Form To Be
Reported on

(a) Credits

Totals

(b) Ratios

(c) Special
Allowance

(d) Subtract
column (c)
from column (a)

1.00

Instructions for Worksheet 8
Complete Worksheet 8 if you have credits on Form 8582-CR, line 4c from more than one activity or reported on different forms or you have
amounts in column (d) of Worksheets 5, 6, or 7. For credits to be reported on Form 3800, enter “Form 3800, line” followed by the appropriate line
number (3, 24, or 33).
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) and enter the ratio for each of the activities in
column (b). The total of all the ratios must equal 1.00.
Column (c). Complete the following computation:
A. Enter Form 8582-CR, line 5
B. Enter Form 8582-CR, line 37
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 the
current year.

Worksheet 8—Allocation of Unallowed Credits
Name of Activity

Form To Be
Reported on

(keep for your records)
(a) Credits

Totals

(b) Ratios

(c) Unallowed Credits

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. For credits to be reported on Form 3800, enter “Form 3800, line”
followed by the appropriate line number (3, 24, or 33).
Column (b). Enter the amounts from column (c) of Worksheet 8 in this column. These are your unallowed credits for the current year.
Column (c). Subtract column (b) from column (a). These are the allowed credits for the current year. Report the amounts in this column on the
forms normally used. See Reporting Allowed Credits on Your Tax Return, in the instructions.

Worksheet 9—Allowed Credits
Name of Activity

(keep for your records)
Form To Be
Reported on

(a) Credits

Totals

Instructions for Form 8582-CR (Rev. 01-2012)

-13-

(b) Unallowed Credits

(c) Allowed Credits

Part III—Special
Allowance for
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)
Married persons filing
separate returns who lived
CAUTION with their spouses at any time
during the year are not eligible to
complete Part III.
Use Part III to figure the credit
allowed if you have any rehabilitation
credits or low-income housing credits
for property placed in service before
1990. Also use this part if your
low-income housing credit is from a
partnership, S corporation, or other
pass-through entity in which you
acquired your interest before 1990,
regardless of the date the property
was placed in service.
Line 21. Married persons filing
separate returns who lived apart from
their spouses at all times during the
year must enter $125,000 on line 21,
instead of $250,000.
Skip lines 21 through 26 if you
completed Part II of this form and
your modified adjusted gross income
on line 10 was $100,000 or less
($50,000 or less if married filing
separately and you lived apart from
your spouse for the entire year).
Instead, enter the amount from line
15 on line 27.
Line 24. Do not enter more than
$12,500 on line 24 if you are married
filing a separate return and lived apart
from your spouse for the entire year.
Line 27. Figure the tax attributable
to the amount on line 26 as follows.

!

A. Taxable income . . . . . . .
B. Tax on line A* . . . . . . . . . . . . . . .
C. Enter amount from Form
8582-CR, line 26 . . . . . . .
D. Subtract line C from line A
E. Tax on line D* . . . . . . . . . . . . . . .
F. Subtract line E from line B and enter
the result on Form 8582-CR, line 27
*For Form 1040, use the Tax Table, Tax Computation
Worksheet, or other appropriate method you used to
figure your tax. For Form 1041, use the Tax Rate
Schedule, Qualified Dividends Tax Worksheet, or
Schedule D, whichever applies.

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.

Part V—Passive Activity
Credit Allowed

Part IV—Special
Allowance for
Low-Income Housing
Credits for Property
Placed in Service After
1989
Married persons filing
separate returns who lived
CAUTION with their spouses at any time
during the year are not eligible to
complete Part IV.

!

Use Part IV to figure the credit
allowed 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 Part
IV only if your interest in the
pass-through entity was also acquired
after 1989.
Line 35. Figure the tax attributable
to the remaining special allowance as
follows.
A. Taxable income . . . . . . . . .
B. Tax on line A* . . . . . . . . . . . . . . .
C. Enter $25,000
($12,500 if married
filing separate return
and you and your
spouse lived apart at
all times during the
year) . . . . . . . . . . .
D. Enter amount, if
any, from Form
8582, line 10 . . . . . .

Reporting Allowed Credits
on Your Tax Return
For tax years beginning after
2011, line numbers on the
CAUTION referenced forms may
change. See the form instructions for
the referenced forms on how to report
the passive activity credit allowed.
Form 3800. Enter on Form 3800,
line 3, 24, and 33, whichever apply,
the passive activity general business
credits allowed.
Form 8834. See the Instructions for
Form 8834 for instructions on how to
report the passive activity credit
allowed.

!

Publicly Traded
Partnerships (PTPs)

E. Enter the amount,
if any, from Form
8582, line 14 . . . . . .
F. Subtract lines D and E
from line C . . . . . . . . . . . .
G. Subtract line F from line A . . .
H. Tax on line G* . . . . . . . . . . . . . . .
I. Subtract line H from line B . . . . . . .
J. Add lines 16 and 30 of
Form 8582-CR and enter the total . . .
K. Tax attributable to the remaining
special allowance. Subtract line J
from line I. Enter the result on
Form 8582-CR, line 35 . . . . . . . . . .
*For Form 1040, use the Tax Table, Tax Computation
Worksheet, or other appropriate method you used to
figure your tax. For Form 1041, use the Tax Rate
Schedule, Qualified Dividends Tax Worksheet, or
Schedule D, whichever applies.

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.
-14-

Use Part V to figure the PAC (as
determined in Part I) that is allowed
for the current year for all passive
activities.
Line 37. If you have only one type of
credit, the amount on line 37 is the
credit allowed for the year. Enter this
amount on the form where it is
normally reported. See Reporting
Allowed Credits on Your Tax Return,
later. Your unallowed credit is line 5
minus line 37.
Use Worksheets 5 through 9,
whichever apply, to allocate the
allowed and unallowed credits if you
have credits from more than one
activity. Also use the worksheets if
you have more than one type of
credit.
Keep a record of each unallowed
credit and the activity to which it
belongs so you may claim the credit if
it becomes allowable in a future year.

A PTP is a partnership whose
interests are traded on an established
securities market or are readily
tradable on a secondary market (or
its substantial equivalent).
An established securities market
includes any national securities
exchange and any local exchange
registered under the Securities
Exchange Act of 1934 or exempted
from registration because of the
limited volume of transactions. It also
includes any over-the-counter market.
A secondary market generally
exists if a person stands ready to
make a market in the interest. An
interest is treated as readily tradable
if the interest is regularly quoted by
persons, such as brokers or dealers,
who are making a market in the
interest.
The substantial equivalent of a
secondary market exists if there is no

Instructions for Form 8582-CR (Rev. 01-2012)

identifiable market maker, but holders
of interests have a readily available,
regular, and ongoing opportunity to
sell or exchange their interests
through a public means of obtaining
or providing information on offers to
buy, sell, or exchange interests.
Similarly, the substantial equivalent of
a secondary market exists if
prospective buyers and sellers have
the opportunity to buy, sell, or
exchange interests in a timeframe
and with the regularity and continuity
that the existence of a market maker
would provide.

Credits From PTPs

A credit from a passive activity held
through a PTP is allowed to the
extent of the tax attributable to net
passive income from that partnership.
In addition, rehabilitation credits and
low-income housing credits from
rental real estate activities held
through PTPs are allowed to the
extent of any special allowance that
remains after taking into account
losses and credits from rental real
estate activities not owned through
PTPs. See Special Allowance for
Rental Real Estate Activities, earlier.
Do not enter credits from
PTPs on the worksheets or on
CAUTION Form 8582-CR. Instead, use
the following steps to figure the
allowed and unallowed credits from
passive activities held through PTPs.

!

Computation of Allowed
Passive Activity Credits
From PTPs

Complete Steps 1 and 2 only if you
have net passive income from a PTP
with passive activity credits (including
prior year unallowed credits).
Step 1. Figure the tax attributable to
net passive income from each PTP
with passive activity credits (including
prior year unallowed credits) by
following the steps shown in the
worksheet in the line 6 instructions.
Complete a separate tax computation
for each PTP with net passive
income.
Step 2. Passive activity credits from
each PTP are allowed to the extent of
the tax attributable to net passive
income from the same PTP. Credits
in excess of the tax attributable to net
passive income may be allowed
under one or more steps below.
Complete Steps 3 through 5 only if
your passive activity credits (including
prior year unallowed credits) include
rehabilitation credits from rental real
estate activities from PTPs,
low-income housing credits for
property placed in service before
1990 from PTPs, or low-income
housing credits from PTPs in which
you acquired your interest before
1990 (regardless of the date placed in
service).

Step 3. Reduce rehabilitation credits
from rental real estate activities from
each PTP, low-income housing
credits for property placed in service
before 1990 from each PTP, and any
low-income housing credits (including
prior year unallowed credits) from
each PTP in which you acquired your
interest before 1990 (regardless of
the date placed in service) to the
extent of the tax, which was figured in
Step 1, attributable to net passive
income from that PTP.
Step 4. Before beginning this step,
complete Form 8582-CR if you have
any passive credits that are not from
PTPs. Subtract the total of lines 16,
30, and 36, if any, of Form 8582-CR,
from the amount on line 27 of Form
8582-CR, to figure the tax attributable
to the special allowance available for
the credits in Step 3.
If your only passive credits are
from PTPs, complete lines 21 through
27 of Form 8582-CR as a worksheet.
The amount on line 27 is the tax
attributable to the special allowance
available for the credits in Step 3.
Step 5. Rehabilitation credits from
rental real estate activities of PTPs,
low-income housing credits for
property placed in service before
1990 by PTPs, and low-income
housing credits from PTPs in which
you acquired your interest before
1990 (regardless of the date placed in
service) allowed under the special
allowance are the smaller of the total
credits from Step 3 or the amount
figured in Step 4. If Step 4 is smaller
than Step 3, allocate the amount in
Step 4 pro rata to the credits from
each PTP in Step 3.
Complete Steps 6 through 8 only if
you have low-income housing credits
(including prior year unallowed
credits) for property placed in service
after 1989 from a PTP in which you
acquired your interest after 1989.
Step 6. Reduce low-income housing
credits (including prior year unallowed
credits) for property placed in service
after 1989 from each PTP in which
you also acquired your interest after
1989 to the extent of the tax
attributable to net passive income
from that PTP, which was figured in
Step 1.
Step 7. Before beginning this step,
complete Form 8582-CR if you have
any passive credits that are not from
PTPs. Subtract the sum of the credits
allowed in Step 5 above and Form
8582-CR, line 36, from the amount on
Form 8582-CR, line 35, to figure the
tax attributable to the special
allowance available for the credits in
Step 6.
If your only passive credits are
from PTPs, complete the steps
shown in the worksheet in the line 35

Instructions for Form 8582-CR (Rev. 01-2012)

-15-

instructions. Subtract the credits
allowed in Step 5 above from the tax
figured on line K of that worksheet.
The result is the tax attributable to the
special allowance available for the
credits in Step 6.
Step 8. Low-income housing credits
allowed under the special allowance
for property placed in service after
1989 from a PTP in which you also
acquired your interest after 1989 are
the smaller of the total credits from
Step 6 or the amount figured in Step
7. If Step 7 is smaller than Step 6,
allocate the amount in Step 7 pro rata
to the credits from each PTP in Step
6.
Step 9. Add the credits from Steps
2, 5, and 8. These are the total
credits allowed from passive activities
of PTPs.
Step 10. Figure the allowed and
unallowed credits from each PTP.
Report the allowed credits on the
forms normally used. Keep a record
of the unallowed credits to be carried
forward to next year.

Part VI—Election To
Increase Basis of Credit
Property
Complete Part VI if you disposed of
your entire interest in a passive
activity and elect to increase the
basis of the credit property used in
the activity by the unallowed credit
that reduced the basis of the
property.

Line 38. Check the box if you elect
to increase the basis of credit
property used in a passive activity by
the unallowed credit that reduced the
property’s basis. The election is
available for a fully taxable disposition
of an entire interest in an activity for
which a basis adjustment was made
as a result of placing in service
property for which a credit was taken.
You may elect to increase the basis
of the credit property immediately
before the disposition (by an amount
no greater than the amount of the
original basis reduction) to the extent
that the credit had not been allowed
previously because of the passive
activity credit limitations. The amount
of the unallowed credit that may be
applied against tax is reduced by the
amount of the basis adjustment.
No basis adjustment may be
elected on a partial disposition of your
interest in a passive activity or if the
disposition is not fully taxable. The
amount of any unallowed credit,
however, remains available to offset
the tax attributable to net passive
income.

Paperwork Reduction Act Notice.
We ask for the information on this
form to carry out the Internal
Revenue laws of the United States.
You are required to give us the
information. We need it to ensure that
you are complying with these laws
and to allow us to figure and collect
the right amount of tax.
You are not required to provide the
information requested on a form that
is subject to the Paperwork Reduction
Act unless the form displays a valid
OMB control number. Books or
records relating to a form or its
instructions must be retained as long
as their contents may become

material in the administration of any
Internal Revenue law. Generally, tax
returns and return information are
confidential, as required by section
6103.
The time needed to complete and
file this form will vary depending on
individual circumstances. The
estimated burden for individual
taxpayers filing this form is approved
under OMB control number
1545-0074 and is included in the
estimates shown in the instructions
for their individual income tax return.
The estimated burden for all other
taxpayers who file this form is shown
below.

-16-

Recordkeeping . . . . . . .

2 hr., 4 min.

Learning about the law
or the form . . . . . . . . . .

6 hr., 4 min.

Preparing the form . . . .

4 hr., 19 min.

Copying, assembling,
and sending the form to
the IRS . . . . . . . . . . . . .

1 hr., 9 min.

If you have suggestions for making
this form simpler, we would be happy
to hear from you. See the instructions
for the tax return with which this form
is filed.

Instructions for Form 8582-CR (Rev. 01-2012)