Question

Which of the following situations does NOT describe a material participant?
A. Arabella participated in Activity X for 612 hours.
B. Anthony participated in Activity Y for 210 hours, more than any other individual.
C. Abbie participated in Activity A for 20 hours, Activity B for 80 hours and Activity C for 75 hours
D. Raj was a full-time employee at the law firm, Activity Q. from 2008 to 2018.

Answer 1

Answer:

C. Abbie participated in Activity A for 20 hours, Activity B for 80 hours and Activity C for 75 hours

Explanation:

To prove material participation, one of the following situation should be satisfied:

1. Work 500 hours or more during the year (Part A)

2. Participate in the activity for more than 100 hours during the year, with no one else working more than the individual (Part B)

3. Materially participate in the activity for any five taxable years during the 10 tax years immediately preceding the taxable year (Part D)

Hence, it can be concluded that none of the conditions are satisfied in Part C.

Answer 2

The correct answer is C.

To prove material participation, one of the below situations should be fulfilled:

• Work 500 hours or more during the year (Part A) .
• Participate in the activity for more than 100 hours during the year, with no one else working more than the individual (Part B)
• Materially participate in the activity for any five taxable years during the 10 tax years immediately preceding the taxable year (Part D)

Hence, it can be concluded that none of the conditions are satisified in Part C.

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