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Material participation is defined as involvement in the
operations of an activity that is regular, continuous, and
substantial. Sec. 469(h)(1). As explained in section 1.469-
5T(a), Temporary Income Tax Regs., 53 Fed. Reg. 5725 (Feb. 25,
1988), a taxpayer can satisfy the material participation
requirement if the individual meets any one of the seven
regulatory tests:
(1) The individual participates in the activity for
more than 500 hours during such year;
* * * * * * *
(4) The activity is a significant participation
activity * * * for the taxable year, and the
individual’s aggregate participation in all significant
participation activities during such year exceeds 500
hours;
* * * * * * *
(7) Based on all of the facts and circumstances * * *,
the individual participates in the activity on a
regular, continuous, and substantial basis during such
year.
“Participation” generally means any work done in an activity
by an individual who owns an interest in the activity.
Sec. 1.469-5(f)(1), Income Tax Regs. Work done by the individual
is not treated as participation in the activity if such work is
not of a type that is customarily done by an owner of such
activity and one of the principal purposes for performing such
work is to avoid the passive activity limitations of section 469.
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