Which of the following scenarios qualifies as material participation?

The scenario where participation in an activity amounts to more than 500 hours qualifies as material participation because the IRS guidelines stipulate this specific threshold for determining whether an individual is materially participating in a business activity. Material participation is vital as it impacts how income is taxed—specifically, whether it is treated as passive or non-passive.

For tax purposes, an individual must demonstrate significant involvement in the business operations to meet the material participation requirement. Having more than 500 hours of participation during the year indicates substantial engagement and oversight in the activity, implying that the individual is actively involved in decision-making and day-to-day operations.

In contrast, scenarios such as participating for less than 100 hours, owning a significant share but not being actively involved, or only contributing during the planning stages usually do not satisfy the active engagement necessary to be considered material participation. These other situations may show some level of interest or involvement, but they do not reflect the ongoing, substantial participation that the IRS criteria seeks to capture.