Dena owns interests in five businesses and has full-time employees in each business.She participates for 100 hours in Activity A, 120 hours in Activity B, 130 hours in Activity C, 140 hours in Activity D, and 125 hours in Activity E.

Question

Quizplus · Accepted Answer

To be a material participant, the taxpayer must participate in the activity for more than 500 hours during the tax year, or the taxpayer's participation in the activity constitutes substantially all the participation in the activity of all individuals. Alternatively, the taxpayer must participate in the activity for more than 100 hours during the tax year, and the taxpayer's participation is not less than the participation of any other individual. In this case, since Dena participates for more than 100 hours in all five activities, we can eliminate answer choices A and C. Answer choice B is also incorrect because we do not have information on whether Dena's participation constitutes substantially all the participation or not. Therefore, the correct answer is D, as Dena is a material participant with respect to Activities B, C, D, and E, since she participates for more than 100 hours in each activity and her participation is not less than the participation of any other individual.

Dena Owns Interests in Five Businesses and Has Full-Time Employees