Material Participation Template
Your hours only count if you wrote them down.
Built for hosted Bitcoin mining. Twenty activity categories drawn from a CPA memo, a dashboard that tracks you against the 100 and 500 hour tests, and enough structure that a year of entries reads like a record instead of a reconstruction.
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Download the .xlsxThe burden of substantiating participation hours sits with the taxpayer, not with the hosting provider or the pool. A dated log kept as the work happens is how that burden gets met, and it has to exist before anyone asks to see it. This template gives you the format. Your tax advisor decides how your facts apply.
Hours are the evidence. The log is where the evidence lives.
Whether a mining activity is treated as nonpassive turns on a facts and circumstances test. These are the pieces your advisor will be working from.
More than 100 hours
One safe harbor is met at more than 100 hours in the year, provided no other individual participates more hours than you. That second condition matters in a hosted arrangement, so the log asks you to note who else was involved.
Or more than 500
A separate test is met at more than 500 hours, with no comparison to anyone else. The dashboard tracks you against both, so you and your advisor can see which one your year actually supports.
Reading a report is not enough
Work done in the capacity of an investor does not count unless you are directly involved in day to day management or operations. Five of the twenty categories carry a flag so you know to document the decision, not just the review.
Continuity and regularity
A trade or business requires continuity, regularity, and a profit motive. Dated entries spread across twelve months show that pattern. A block of hours logged the week before filing does not.
Four tabs. Open it and start logging.
Instructions
Hand this to a client and they will know what to do without a call. Plain language on why the log exists, how to fill it, and what good looks like.
- 01A seven step walkthrough, from setting the tax year to the monthly review
- 02A color legend marking exactly which cells to type in
- 03Three Tax Court cases showing what corroboration has actually held up
- 04Two questions to raise with a CPA, written out and ready to send
Dashboard
Enter the tax year once and the whole tab keys off it. Every number is a live formula, so it updates the moment a row is added.
- ΣTotal hours, split between taxpayer and spouse, with a session count
- %Progress against the 100 and 500 hour thresholds, with hours remaining
- —Operational versus flagged hours, so the mix is visible all year
- 12Hours by month with a running cumulative, and hours by activity code
Activity Log
One row per work session, 400 rows deep. Dropdowns where dropdowns help and open fields where the detail belongs.
- CActivity dropdown covering all twenty categories
- D:ECode and character fill in automatically, no typing over them
- HA column for who else worked the same task, and roughly how long
- IA column for where the proof lives: ticket number, invoice, file name
Activity Codes
The reference sheet. Twenty categories of work an owner actually performs on a hosted fleet, each one spelled out.
- A01Plain language notes on what each category covers
- A07A flag on the five that can be recast as investor type work
- A14The documentation that supports each one, named specifically
- A20A cross reference back to the source memo, item by item
What the Tax Court has accepted as proof.
Three cases summarized inside the workbook. Read together, they say something useful: hours worked at a distance can count, and the record you kept is what decides it.
An owner ran a lending business from Chicago while spending 60% of his time in Florida. Daily calls to the office, plus contact by phone, fax, and email, counted toward material participation.
A horse breeding activity run largely by long distance calls to the boarding facility and breeders. The court accepted remote calls, promotional work, and travel, and leaned on phone bills, narrative summaries, and testimony to back the hours claimed.
Restaurant and brewery activities where detailed testimony on involvement in every part of the business carried the day. The work was not dismissed as investor type because it went past reviewing reports and non-managerial monitoring.
Start logging this month, not next April.
Contemporaneous entries are worth more than anything assembled later. Download the workbook, set your tax year, and put in your first row today.
