You 'Materially Participated' in the operation of your business if any of the following apply:
- You participated for 500 hours or more
- You participated more than other individuals
- You participate at least 100 hours in the activity and no one participates more than you
- The activity is a significant participation activity and you participated more than 500 hours
- You participated in the activity in 5 of the last 10 years
- The activity is a personal service activity and you participated in any three previous years
- Based on the facts and circumstances, you participate in the activity on a regular and substantial basis. This is not a valid test if you participate less than 100 hours per year, another individual received pay for managing the activity or another individual spent more time managing the activity than you.
For more information, see IRS Publication 925.