Physical or material participation is a key element of the Passive Activity Rules. Under the passive activity rules, you cannot apply losses from one business against income from another business unless you materially participate in each Idaho business.
You materially participate in an activity if you are involved in the operation of the activity on a basis which is:
IRS regulations have detailed tests for determining material participation in any of your Idaho businesses.
Under the two most straightforward tests, you materially participate if:
- You participate in the activity for more than 500 hours during the Tax Year
- Your participation constitutes substantially all the participation in the activity during the Tax Year.