2. Whether the corporation materially
activity, special rules apply. See Publicly
by other reasonable means. Reasonable
participated in the activity for the tax year.
Traded Partnerships (PTPs), later. See Pub.
means for this purpose may include, but are
925 for details about how to report income or
not limited to, the identification of services
To report income, deductions, losses, or
losses from significant participation passive
performed over a period of time and the
credits from a trade or business activity in
activities.
approximate number of hours spent
which the corporation did not materially
performing the services during that period,
In general, if the corporation has credits
participate, see Trade or business activities
based on appointment books, calendars, or
from passive activities, use Worksheet 5 to
without material participation under
narrative summaries.
figure the amount to enter in Part II of Form
Reporting Income, Deductions, Losses, and
8810. However, if the corporation held the
Credits From Trade or Business Activities,
Tests for investors. Work done as an
activity through a PTP, special rules apply.
later.
investor in an activity is not treated as
See Credits From PTPs, later, for details
participation unless the individual was
If the corporation meets any of the five
about how to report credits from these
directly involved in the day-to-day
exceptions and the activity is a trade or
activities.
management or operations of the activity.
business activity in which the corporation
For purposes of this test, work done as an
Material Participation
materially participated, report any income,
investor includes the following activities.
deduction, loss, or credit from the activity on
Personal service corporations and closely
Studying and reviewing financial
the forms or schedules normally used.
held corporations materially or significantly
statements or reports on operations of the
If the rental activity did not meet any of
participate in an activity if one or more
activity.
the five exceptions, it generally is a passive
individuals (each of whom would materially
Preparing or compiling summaries or
activity. Special rules apply if the corporation
or significantly participate in the activity if the
analyses of the finances or operations of the
conducted the rental activity through a
corporation's activity were the individual's
activity for the individual's own use.
publicly traded partnership (PTP) or if any of
activity) directly or indirectly own more than
Monitoring the finances or operations of
the rules described under Recharacterization
50% (by value) of the corporation's
the activity in a nonmanagerial capacity.
of Passive Income, later, apply. See PAL
outstanding stock. For this purpose, an
If the individual is married for the tax year,
rules for partners in PTPs under Special
individual's participation in all activities other
the individual's participation in an activity
Instructions for PTPs, later.
than activities of the corporation is
includes any participation in the activity
disregarded.
If none of the special rules apply, use
during the tax year by that individual's
Worksheets 1 and 2 to determine the amount
spouse, whether or not the spouse owned
A closely held corporation also materially
to enter in Part I of Form 8810 for each
any interest in the activity and whether or not
participates in an activity if the corporation
passive rental activity. If the corporation has
the individual and spouse file a joint return
satisfies the qualifying business
credits from passive rental activities, use
for the tax year.
requirements of section 465(c)(7)(C) (without
Worksheet 5 to figure the amount to enter in
regard to section 465(c)(7)(C)(iv) for the
Tests for individuals. An individual would
Part II of Form 8810. The worksheets are
excluded business exception from the at-risk
materially participate in an activity of the
located later in the instructions.
limitations).
corporation if one or more of the following
tests are satisfied.
Trade or Business
These requirements are met if:
1. The individual participated in the
1. During the entire 12-month period
Activities
activity for more than 500 hours.
ending on the last day of the tax year,
A trade or business activity is an activity
substantially all the services of at least one
2. The individual's participation in the
(other than a rental activity or an activity
full-time employee of the corporation were in
activity for the tax year was substantially all
treated as incidental to an activity of holding
the active management of the activity;
of the participation in the activity of all
property for investment) that:
individuals (including individuals who did not
2. During the same period, substantially
1. Involves the conduct of a trade or
own any interest in the corporation or the
all the services of at least three full-time
business (within the meaning of section
activity) for the year.
nonowner employees were directly related to
162),
the activity; and
3. The individual participated in the
2. Is conducted in anticipation of starting
activity for more than 100 hours during the
3. The deductions attributable to the
a trade or business, or
tax year, and that individual participated at
activity and allowed solely under sections
least as much as any other individual
162 and 404 exceed 15% of the gross
3. Involves research or experimental
(including individuals who did not own any
income from the activity for the tax year.
expenditures deductible under section 174
interest in the corporation or the activity) for
(or that would be if the corporation chose to
the year.
Participation. For purposes of the material
deduct rather than capitalize them).
participation tests listed below, participation
4. The activity is a significant
Reporting Income, Deductions,
generally includes any work the individual
participation activity for the individual for the
did (without regard to the capacity in which
Losses, and Credits From
tax year, and the individual participated in all
the individual did it) in connection with an
significant participation activities during the
Trade or Business Activities
activity in which the corporation owned an
year for more than 500 hours. For this
interest at the time the individual did the
purpose, an individual's participation in all
Trade or business activities with material
work.
activities other than activities of the
participation. If the corporation materially
corporation is disregarded.
Work is not treated as participation,
participated in a trade or business activity,
however, if the work is not work that an
that activity is not a passive activity. Report
A significant participation activity is any
owner of that type of activity would
the income, deductions, losses, and credits
trade or business activity in which the
customarily do, and if one of the individual's
from the activity on the form or schedule
individual participated for more than 100
main reasons for doing the work is to avoid
normally used.
hours during the year and in which the
the disallowance of losses or credits from the
individual did not materially participate under
Trade or business activities without ma-
activity under the passive activity loss and
any of the material participation tests (other
terial participation. In general, use
credit rules.
than this fourth test). For more information
Worksheets 1 and 2 to determine the amount
regarding significant participation, see Pub.
to enter in Part I of Form 8810 for each trade
Proof of participation. Participation in
925.
or business activity in which the corporation
an activity can be proved by any reasonable
5. The individual materially participated
did not materially participate. If, however, the
means. Contemporaneous daily time
in the activity for any 5 (whether or not
corporation held the activity through a PTP or
reports, logs, or similar documents are not
the activity is a significant participation
required if participation can be established
Instructions for Form 8810 (2015)
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