Question

material participation standards for shareholders of subchapter S corporations, who are individuals, include those who during the tax year:

1. participated in the activity for more than 80 hours during the tax year.

2. constituted at least one half of all participation in the activity of all individuals 9including non-owners)

3. participated in all significant participation activities (including activities outside the corporation for more than 200 hours).

4. participated in business activities for more than 100 hours during the tax year and the participation was not less than the activity of any other individual's during the tax year.

Answer 1

4.participated in business activities for more than 100 hours during the tax year and the participation was not less than the activity of any other individual's during the year..

There are 7 test to determine material participation by individuals:

1.participation for more than 500 hours.

2.substantially whole of the participation of all the individuals, including non owner participation (not one half as mentioned in 2nd option).

3.participating in the activity for more than 100 hours and it is more than any other individuals activity.

(as given in option 4 of the question)

4.participated in significant participation activities for more than 500 hours.(not 200 years as given in option 3 of the question).

5.material participation for 5 out of 10 previous tax years.

6.Personal service activites (such as law, medicine, consultancy service etc). in any 3 preceding tax years.

7.provided services on a regular, continuous and substantial basis.

(only option 4 qualifies as material participation).