Commercial revitalization is the rehabilitation of a building in a distressed community.

Per IRS Instructions for Form 8582 Passive Activity Loss Limitations, 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 2021 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 2020.

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) or Schedule K-1 (Form 1120-S) will automatically flow to Part III of Form 8582 Passive Activity Loss Limitations, if applicable.

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