Select the best answer Which of the following is not a test that can be used to

Question

Select the best answer Which of the following is not a test that can be used to show that a trust met the material partic how standards? The decedent had materially participated in the activity during the portion of the year he/she was alive. B. The trust participates in the activity more than 500 hours during the year The trust participates more than 100 hours during the year and no other person had more participation in the activity during the year. C. The trustee's participation in the activity for the year constitutes substantially all of the participation in such activities of all individuals for such year D.

Explanation / Answer

Answer:

According to section 459 of the internal Revenue Code (IRC), one claim to have materially participated in the operation of a trade or business activity by meeting one of seven following tests:

Test-1: You work 500 hours or more in the activity during the year.

Test-2: You do all, or nearly all, of the work in the activity.

Test-3: You work more than 100 hours in the activity during the year, and no one else works more than you do.

Test-4: The activity is a significant participation activity (SPA), and the sum of the SPAs in which you work 100–500 hours exceeds 500 hours for the year.

Test-5: You materially participated in the activity in any 5 of the previous 10 years.

Test-6: The activity is a personal service activity and you materially participated in that activity in any three prior years.

Test-7: Based on all of the facts and circumstances, you participate in the activity on a regular, continuous, and substantial basis during that year.

Hence, Option A is correct.

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