What does material participation mean on the CPA exam?
Material participation. Involvement in an activity that is regular, continuous and substantial, tested against seven alternative standards. Meeting any one takes the activity out of the passive rules.
Defined against Treas. Reg. 1.469-5T(a).
Which CPA exam sections use material participation?
Material participation appears in the TCP section of the CPA exam.
Related terms
- tentative minimum tax: The alternative minimum tax computed on its own, before comparing it to the regular tax.
- regular tax: Tax computed under the ordinary rules, before the alternative minimum tax is considered.
- passive activity: A trade or business in which the taxpayer does not materially participate, plus most rental activity.
- passive income: Income from an activity the taxpayer does not materially participate in, plus most rental income.
- control objectives: What a set of controls is supposed to achieve, stated so that it can be tested.