7756. What limitations apply when claiming the low-income housing tax credit?polearyrcline202005-04-08T19:45:00Z2014-07-14T17:18:00Z2014-07-14T17:18:00Z23892220Hewlett-Packard Company1852604142007-10-05T00:00:00ZTaxFactsDefaultArticleSite Map/Life Insurance/Income Taxation/Proceeds/Living/Disposition/Sale or Purchase of a Contract115140262-00-tf1.xml263.00;#2099;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 1If the owner of a life insurance or endowment contract sells the contract, such as in a life settlement, what are the income tax consequences to the seller?74200.0000000000TaxFactsDefaultArticleSBMEDIA\moss-admin2010-01-14T23:41:49Z7756. What limitations apply when claiming the low-income housing tax credit?The amount of low-income housing tax credit that can be taken is limited to the housing credit dollar amount that has been allocated to the building by a state housing credit agency. Once granted, the housing credit dollar amount applies to the building for the remaining years of the 15-year compliance period.IRC Sec. 42(h). To facilitate tracking of credits, each building for which an allocation of the low-income housing credit is made is assigned a building identification code (BIN).Notice 88-91, 1988-2 CB 414. Allocation of the credit is made on Form 8609, which should be filed with the taxpayer’s income tax return.The low-income housing tax credit is added with certain other credits into the general business credit calculation, and is subject to the general business credit limitation.IRC Sec. 38(b)(5). See Q 7814 concerning the general business credit limitation.The passive loss rules generally apply to the low-income housing tax credit. However, the low-income housing tax credit is given special treatment under the rental real estate rules. A taxpayer need not actively participate in the low-income housing rental activity to obtain the $25,000 rental real estate exemption amount with respect to the low-income housing tax credit.IRC Sec. 469(i)(6)(B)(i). Also, for property placed in service after 1989, there is no phase-out of the $25,000 rental real estate exemption with respect to the low-income housing credit.IRC Sec. 469(i)(3)(D). For property placed in service before 1990, the $25,000 exemption amount for rental real estate with respect to the low-income housing credit began to phase-out when a taxpayer had income in excess of $200,000.IRC Sec. 469(i)(3)(B), prior to amendment by OBRA ’89. With respect to an interest in a pass-through entity, this repeal of the phaseout of the $25,000 exemption does not apply unless such interest was acquired after 1989.OBRA ’89, Sec. 7109(b)(2). In addition, the $25,000 rental real estate exemption, which is otherwise unavailable with respect to a publicly traded partnership, is available to the extent that the low-income housing credit and the rehabilitation investment credit (see Q 7758) exceed the regular tax liability attributable to income from the partnership.IRC Sec. 469(k). (See Q 7921).The not-for-profit rules of IRC Section 183 do not apply to disallow losses, deductions, or credits attributable to the operation of low-income housing.Treas. Reg. §1.42-4.