Question

Ned, a college professor, owns a separate business (not real estate) in which he participates in the current year. He has one employee who works part-time in the business.

a.	If Ned participates for 120 hours and the employee participates for 120 hours during the year, Ned does not qualify as a material participant.
	b.	If Ned participates for 95 hours and the employee participates for 5 hours during the year, Ned probably does not qualify as material participant.
	c.	If Ned participates for 500 hours and the employee participates for 520 hours during the year, Ned qualifies as material participant.
	d.	If Ned participates for 600 hours and the employee participates for 2,000 hours during the year, Ned qualifies as a material participant.
	e.	None of these applies.

Answer 1

Answer-The correct option is d.If Ned participates for 600 hours and the employee participates for 2,000 hours during the year, Ned qualifies as a material participant.

Explanation:-

Option a. is incorrect; Ned participates for more than 100 hours and this is not less
than the participation of any other individual (Test 3). Option b. is incorrect; Ned's
participation constitutes substantially all of the participation, even though Ned's
participation is less than 100 hours (Test 2). Option c. is incorrect; Ned would have
to participate for more than 500 hours for statement c. to be correct (Test 1). Option
d. is correct; an individual who participates for more than 500 hours is a material
participant regardless of how much others participate (Test 1).