Phase-out of exemption

(A) In general

(A)In general#

In the case of any taxpayer, the $25,000 amount under paragraph (2) shall be reduced (but not below zero) by 50 percent of the amount by which the adjusted gross income of the taxpayer for the taxable year exceeds $100,000.

(B)Special phase-out of rehabilitation credit#

In the case of any portion of the passive activity credit for any taxable year which is attributable to the rehabilitation credit determined under section 47, subparagraph (A) shall be applied by substituting “$200,000” for “$100,000”.

(C)Exception for low-income housing credit#

Subparagraph (A) shall not apply to any portion of the passive activity credit for any taxable year which is attributable to any credit determined under section 42.

(D)Ordering rule#

Paragraph (1) shall be applied for any taxable year—

(i) first, to the passive activity loss,

(ii) second, to the portion of the passive activity credit to which subparagraph (B) and 1 1 So in original. Probably should be “or”. (C) does not apply,

(iii) third, to the portion of such credit to which subparagraph (B) applies, and

(iv) then, to the portion of such credit to which subparagraph (C) applies.

(D)(i)#

first, to the passive activity loss,

(D)(ii)#

second, to the portion of the passive activity credit to which subparagraph (B) and 1 1 So in original. Probably should be “or”. (C) does not apply,

(D)(iii)#

third, to the portion of such credit to which subparagraph (B) applies, and

(E)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) the amounts excludable from gross income under sections 85(c), 135, and 137,

(iii) the amounts allowable as a deduction under sections 219, 221, and 250, and

(iv) any passive activity loss or any loss allowable by reason of subsection (c)(7).

(E)(i)#

any amount includible in gross income under section 86,

(E)(ii)#

the amounts excludable from gross income under sections 85(c), 135, and 137,

(E)(iii)#

the amounts allowable as a deduction under sections 219, 221, and 250, and

(D)Ordering rule#

Paragraph (1) shall be applied for any taxable year—

(i) first, to the passive activity loss,

(ii) second, to the portion of the passive activity credit to which subparagraph (B) and 1 1 So in original. Probably should be “or”. (C) does not apply,

(iii) third, to the portion of such credit to which subparagraph (B) applies, and

(iv) then, to the portion of such credit to which subparagraph (C) applies.

(D)(i)#

first, to the passive activity loss,

(D)(ii)#

second, to the portion of the passive activity credit to which subparagraph (B) and 1 1 So in original. Probably should be “or”. (C) does not apply,

(D)(iii)#

third, to the portion of such credit to which subparagraph (B) applies, and

(E)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) the amounts excludable from gross income under sections 85(c), 135, and 137,

(iii) the amounts allowable as a deduction under sections 219, 221, and 250, and

(iv) any passive activity loss or any loss allowable by reason of subsection (c)(7).

(E)(i)#

any amount includible in gross income under section 86,

(E)(ii)#

the amounts excludable from gross income under sections 85(c), 135, and 137,

(E)(iii)#

the amounts allowable as a deduction under sections 219, 221, and 250, and