Regulation · 1988
Treas. Reg. 1.469-5T
Temp. Treas. Reg. §1.469-5T(a), (f)(4); Temp. Treas. Reg. §1.469-1T(e)(3)(ii)(A), (B), (iv); IRC §469(c)(1), (c)(2), (h)(5), (i), (j)(10); IRC §280A(c)(5), (d)(1), (g)
Treasury regulation
What it holds
A taxpayer materially participates in an activity for the year by meeting any one of seven tests: (1) more than 500 hours; (2) substantially all of the participation by anyone; (3) more than 100 hours and not less than any other individual, nonowners included; (4) significant participation activities totaling more than 500 hours; (5) material participation in any 5 of the preceding 10 years; (6) a personal service activity materially participated in for any 3 prior years; (7) regular, continuous and substantial participation on the facts (more than 100 hours, and management time does not count if someone else is paid to manage). A spouse's participation counts (§469(h)(5)). Participation may be shown by any reasonable means (§1.469-5T(f)(4)), but courts reject reconstructed or estimated logs.
Why it matters for your study: Short-term rentals. An activity with an average period of customer use of 7 days or less (§1.469-1T(e)(3)(ii)(A)), or 30 days or less with significant personal services ((ii)(B)), is not a rental activity, so material participation decides whether the study's depreciation is nonpassive. Cases: Chapin, T.C. Memo. 1996-56; Rapp, T.C. Memo. 1999-249; Barniskis, T.C. Memo. 1999-258; Bailey, T.C. Memo. 2001-296; Rogerson, T.C. Memo. 2022-49 (actual use controls). Eger v. United States, 405 F. Supp. 3d 850 (N.D. Cal. 2019), aff'd (9th Cir. 2020) (the guests, not the manager, are the customers when the owner keeps use rights).
- Category
- Passive loss & participation
- Applies to
- All property types
- Status
- Vetted
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