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Commercial revitalization is the rehabilitation of a building in a distressed community. The commercial revitalization deduction (CRD) for rental real estate activities is not allowed for buildings placed in service after December 31, 2009.

Per IRS Instructions for Form 8582 Passive Activity Loss Limitations, on page 4:

Commercial revitalization deduction (CRD). The special $25,000 allowance for the CRD from rental real estate activities isn’t subject to the active participation rules or modified adjusted gross income limits just discussed. The $25,000 allowance must first be applied to losses from rental real estate activities with active participation, figured without regard to the CRD (see Part II, later). Any remaining portion of the $25,000 allowance is available for the CRD from rental real estate activities (see Part III, later). See the instructions for Worksheet 2.

Generally, you can't claim a current year CRD for 2020 unless you are a fiscal year taxpayer or you are a partner or shareholder in a fiscal year pass-through entity that had a CRD for a building placed in service before 2010 and elected to ratably claim a deduction for the CRD over a period of 120 months that included all or part of 2019.

CAUTION! You can’t claim a CRD for a building placed in service after December 31, 2009.

In the TaxAct® program, any CRD entered on Schedule K-1 (Form 1065) Partner’s Share of Income, Deductions, Credits, etc. or Schedule K-1 (Form 1120-S) Shareholder’s Share of Income, Deductions, Credits, etc. will automatically flow to Part III of Form 8582 Passive Activity Loss Limitations, if applicable.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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