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Passive Activity Loss ATG - Exhibit 4.3: Material Participation Activity (SPA)

Publication Date - December, 2004

NOTE: This guide is current through the publication date. Since changes may have occurred after the publication date that would affect the accuracy of this document, no guarantees are made concerning the technical accuracy after the publication date.


Table of Contents / Exhibit 4.4
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Exhibit 4.3: Material Participation Activity (SPA)
Reg. 1.469-5T(a)(4)

Is the activity a SPA? Losses are nonpassive if the sum of hours in all SPAs is more than 500 hours for the year.  

Decision Tree

Activity cannot be a SPA if it is:

  • A rental or leasing activity
  • An investment activity or a trader in stocks and bonds 
  • Any business in which the taxpayer materially participated.  TP materially participated if he did more than 500 hours work; did most of the work; materially participated any 5 of the last 10 years: or met one of the other tests in Reg. 1.469-5T(a).  
  • An activity in which the taxpayer worked less than 100 hours during the year.
  • A limited partnership interest

Go to the next step.  Do not include any of the above activities in the following step.

Activity is a SPA, and losses are nonpassive if:

  • The taxpayer worked 100-500 hours during the year in the activity.
  • Hours in all SPAs are more than 500 in total.

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Page Last Reviewed or Updated: 25-Sep-2014