I thought this has been discussed here, but I'm not having any luck with a search. So, apologies for posting if it has indeed been discussed.
IRC Sec 469 tells us that the section applies to any activity in connection with a trade or business. For purposes of the section, do hours spent in the activity prior to the start of the trade or business count toward material participation?
For example, client buys a vacation rental. He spends 200 hours participating in the activity during the tax year. 180 of those hours happened prior to listing the property for rent on Airbnb. e.g. fixing and furnishing the property.
Are those hours thrown out as we do not have a functional trade or business at the time they occurred?
Bonus question: Temp Reg §1.469-5T tells us:
(ii)Certain management activities
An individual's services performed in the management of an activity shall not be taken into account in determining whether such individual is treated as materially participating in such activity for the taxable year under paragraph (a)(7) of this section unless, for such taxable year—
(A)
No person (other than such individual) who performs services in connection with the management of the activity receives compensation described in section 911(d)(2)(A) in consideration for such services; and
(B)
No individual performs services in connection with the management of the activity that exceed (by hours) the amount of such services performed by such individual.
If this property is listed with Airbnb, is Airbnb providing "management" services by hosting the property on its platform, providing a scheduling/booking interface, and handling the financial transaction? Or is that merely most aligned with a software service offering, as the client is the "host" on Airbnb and does all of the communicating, handling concerns, etc.