Instructions For Form 8810 (2015) (Page 3 of 14) in pdf

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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Instructions For Form 8810 (2015) Page 3

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