8698 / When is a taxpayer treated as materially participating in an activity for purposes of determining whether the activity is active or passive?

In general, a taxpayer is considered to materially participate in an activity if the taxpayer is involved in the operations of the activity on a regular, continuous, and substantial basis.¹ The material participation requirement is generally met by a taxpayer who is able to satisfy any one of the following five tests:

(1)  the taxpayer does substantially all of the work required by the activity;

(2)  the taxpayer participates in the activity for more than 500 hours during the year;

(3)  the taxpayer participates in the activity for more than 100 hours during the year and meets certain other requirements;