Page:United States Statutes at Large Volume 100 Part 3.djvu/430

 100 STAT. 2238

PUBLIC LAW 99-514—OCT. 22, 1986

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- \ not below zero) by 50 percent of the amount by which the r adjusted gross income of the taxpayer for the taxable year exceeds $100,000. "(B) SPECIAL PHASE-OUT OF LOW-INCOME HOUSING AND REHABILITATION CREDITS.—In the case of any portion of the

passive activity credit for any taxable year which is attributable to any credit to which paragraph (6)(B) applies, subparagraph (A) shall be applied by substituting '$200,000' for '$100,000'. "(C) ORDERING RULE TO REFLECT SEPARATE PHASE-OUTS.—If

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subparagraph (B) applies for any taxable year, paragraph (1) shall be applied— "(i) first to the passive activity loss, "(ii) second to the portion of the passive activity credit to which subparagraph (B) does not apply, and "(iii) then to the portion of such credit to which subparagraph (B) applies. "(D) ADJUSTED GROSS INCOME.—For purposes of this paragraph, adjusted gross income shall be determined without regard to— "(i) any amount includible in gross income under section 86, "(ii) any amount allowable as a deduction under ' section 219, and "(iii) any passive activity loss. >: -, "(4) SPECIAL RULE FOR ESTATES.—

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"(A) IN GENERAL.—In the case of taxable years of an estate ending less than 2 years after the date of the death of the decedent, this subsection shall apply to all rental real estate activities with respect to which such decedent actively participated before his death. "(B) REDUCTION FOR SURVIVING SPOUSE'S EXEMPTION.—For

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purposes of subparagraph (A), the $25,000 amount under paragraph (2) shall be reduced by the amount of the exemption under paragraph (1) (without regard to paragraph (3)) allowable to the surviving spouse of the decedent for the taxable year ending with or within the taxable year of the estate. "(5) MARRIED INDIVIDUALS FILING SEPARATELY.—

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"(A) IN GENERAL.—Except as provided in subparagraph (B), in the case of any married individual filing a separate return, this subsection shall be applied by substituting— "(i) '$12,500' for '$25,000' each place it appears, "(ii) '$50,000' for '$100,000' in paragraph (3)(A), and "(iii)'$100,000'for'$200,000'in paragraph (3)(B). "(B) TAXPAYERS NOT LIVING APART.—This subsection shall not apply to a taxpayer who— "(i) is a married individual filing a separate return for any taxable year, and "(ii) does not live apart from his spouse at all times during such taxable year. ,.; j i t t m "(6) ACTIVE PARTICIPATION.—

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"(A) IN GENERAL.—An individual shall not be treated as actively participating with respect to any interest in any rental real estate activity for any period if, at any time during such period, such interest (including any interest of

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