11/7/2023 0 Comments Irs passive activity audit guideThe final test depends only on facts and circumstances of the activity. The 1 st 4 tests are based on current participation, while 2 of the tests are based on prior participation in the activity. Material participation is satisfied if any of the 7 tests are satisfied. The IRS has devised 7 tests for classifying activities. Special rules, which are not discussed in this article, apply to certain retired or disabled farmers. Participation is generally proved by any reasonable method, usually by contemporaneous daily records, such as appointment books, calendars, or other records.
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