Instructions For Form Ftb 3801-Cr - Passive Activity Credit Limitations

elected on a partial disposition of an interest in a

Part IV — Special Allowance for Low-Income

However, if you have low-income housing

passive activity.

Housing Credit for Property Placed in Service

credits for property placed in service after 1989,

After 1989

include those credits in Worksheet 3 instead of

Caution: In computing the special allowance for

Worksheet 2. If you held an indirect interest in

Use Part IV to figure the credit allowed if you

rental real estate activities with active participa-

the property through a partnership, S corpora-

have any low-income housing credits for

tion, the dollar limitation for the low-income

tion, or other pass-through entity, use Work-

property placed in service after 1989. If you held

housing credit is more than the amount allowed

sheet 3 only if you acquired your interest in the

an indirect interest in the property through a

under federal law. The California limitation is

pass-through entity after 1989.

partnership, S corporation, or other pass-

$75,000 ($37,500 if married filing a separate

through entity, use this part only if your interest

return and you lived apart the entire year).

Caution: If you were married filing a separate

in the pass-through entity was also acquired

return and lived with your spouse at any time

E Passive Activity Credit

after 1989.

during the year, include the credits in

Carryovers

Worksheet 4 but not in Worksheet 2 or

Part V — Passive Activity Credits Allowed

Worksheet 3.

Use Part V to figure the amount of the passive

Passive activity credits are suspended and

activity credit (as determined in Part I) that is

Line 3a through Line 3c – Individuals, including

carried forward indefinitely. Unlike losses,

allowed for 2002 for all passive activities.

limited partners, and qualifying estates who had

suspended credits are not allowed when you

low-income housing credits for property placed

dispose of the activity. However, you may elect

Part VI — Election to Increase Basis of Credit

in service after 1989, should include those

to increase your basis (by the amount of the

Property

credits on line 3a and line 3b instead of

original basis reduction) to the extent the credit

Use Part VI if you disposed of your entire

Worksheet 2. If you held an indirect interest in

has not been used.

interest in a passive activity in 2002 and elect to

the property through a partnership, S corpora-

increase the basis of credit property used in a

The credit becomes allowable under the passive

tion, or other pass-through entity, use line 3a

passive activity.

loss rules when there is sufficient passive

and line 3b only if you also acquired your

income to allow its use or it is within the scope

interest in the pass-through entity after 1989.

Specific Line Instructions

of the rental real estate rule. Once the credit

Line 4a through Line 4c – Individuals should

becomes allowable under the passive loss rule,

include on line 4a and line 4b credits from

For purposes of these instructions, “worksheet”

it is subject to the other limitations applicable to

passive activities which were not entered on

refers to Worksheet 1 through Worksheet 9 in

the use of credits, such as the limitation that

line 1a and line 1b, line 2a and line 2b, or line 3a

the instructions for federal Form 8582-CR. You

credits may not reduce regular tax below

and line 3b. Estates (other than qualifying

must use California amounts when completing

tentative minimum tax.

estates), trusts, and S corporations, should

these worksheets. Use only the credits subject

In addition, the treatment of passive activity

include credits from all passive activities on

to the California passive credit limitation rules

credits is determined in all respects by the

line 4a through line 4c.

(described in General Information C, Who Must

general rules applicable to those credits,

File). Keep these worksheets for your records.

Line 1, Line 2, Line 3, and Line 4 – If you are

including carryover periods.

using a different form to report credits from the

Part I

F Overview of Form

same activity, keep them separate by listing the

activity each time for each credit.

Computation of 2002 Passive Activity Credits

The form consists of six parts.

Line 6 – If form FTB 3801, line 3, shows net

Line 1a through Line 1c – Individuals and

Part I — 2002 Passive Activity Credits

income or if you did not complete form

qualifying estates that actively participated in

Use Part I to combine your credits from passive

FTB 3801 because you had net passive income,

rental real estate activities (other than rental real

activities to determine if you have passive

you will have to figure the tax on the net passive

estate activities with low-income housing

activity credits for 2002.

income. If you have an overall loss on an entire

credits) should include the credits from these

disposition of your interest in a passive activity,

If your credits from all passive activities exceed

activities on line 1a through line 1c. Use

reduce net passive income, if any, on form

the tax attributable to net passive income, you

Worksheet 1 to figure the amounts to enter on

FTB 3801, line 3, to the extent of the loss (but

may have a suspended passive activity credit for

line 1a and line 1b.

not below zero) and use only the remaining net

2002. Generally, you have net passive income if

A qualifying estate is one that is treated as

passive income in the computation below. If you

form FTB 3801, line 3 shows income. See the

actively participating for the two tax years

had a net passive activity loss, enter -0- on

instructions for form FTB 3801-CR, line 6 for

following the death of the taxpayer. The

line 6, and go on to line 7.

details.

decedent must have actively participated in the

Figure the tax on net passive income as follows:

Part II — Special Allowance for Rental Real

rental real estate activity in the tax year he or

Estate Activities with Active Participation

A. Taxable income

she died.

Use Part II to figure the credit allowed if you

including net

Caution: If you were married filing a separate

have any credits from rental real estate activities

passive income . . . . . . . A ______

return and lived with your spouse at any time

in which you actively participated (other than

B. Tax on line A . . . . . . . . . . . . . . . . . B ______

during the year, even if you actively participated

low-income housing credit). See the instructions

C. Taxable income without

in rental real estate activities, include the credits

for federal Form 8582-CR, “Rental Activities.”

net passive income . . . . C ______

in Worksheet 4 but not on Worksheet 1.

D. Tax on line C . . . . . . . . . . . . . . . . . D ______

Part III — Special Allowance for Low-Income

Caution: You may take credits that arose in a

E. Subtract line D from line B

Housing Credits for Property Placed in Service

prior tax year (other than low-income housing

and enter the result on form

Before 1990 (or from Pass-Through Interests

credits) under the special allowance only if you

FTB 3801-CR, line 6 . . . . . . . . . . . E ______

Acquired Before 1990)

actively participated in the rental real estate

Note: When using taxable income in the above

Use Part III to figure the credit allowed if you

activity for both that prior year and this year. If

computation, it is not necessary to refigure

have any low-income housing credits for

you did not actively participate for both years,

items that are based on a percentage of

property placed in service before 1990. Also, use

include the credits in Worksheet 4 but not in

adjusted gross income.

this part if your low-income housing credit is

Worksheet 1.

from a partnership, S corporation, or other pass-

Line 7 – If line 7 is zero because the tax on net

Line 2a through Line 2c – Individuals, including

through entity in which you acquired your

passive income on line 6 is more than your

limited partners, and qualifying estates who had

interest before 1990, regardless of the date the

credits from passive activities on line 5, all of

low-income housing credits for property placed

property was placed in service.

your passive activity credits are allowed. In this

in service before 1990, should include the

case, enter the amount from line 5 on line 37.

credits from those activities on line 2a and

Report the credits on the related credit forms.

line 2b.

Do not complete Worksheet 5 through

Worksheet 9.

Page 2 FTB 3801-CR Instructions 2002

Instructions For Form Ftb 3801-Cr - Passive Activity Credit Limitations - 2002 Page 2

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