From Pub 925:
Material participation tests.
You materially participated in a trade or business activity for a tax year if you satisfy any of the following tests.
You participated in the activity for more than 500 hours.
Your participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who didn’t own any interest in the activity.
You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual (including individuals who didn’t own any interest in the activity) for the year.
The activity is a significant participation activity, and you participated in all significant participation activities for more than 500 hours. A significant participation activity is any trade or business activity in which you participated for more than 100 hours during the year and in which you didn’t materially participate under any of the material participation tests, other than this test. See Significant Participation Passive Activities , under Recharacterization of Passive Income, later.
You materially participated in the activity (other than by meeting this fifth test) for any 5 (whether or not consecutive) of the 10 immediately preceding tax years.
The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years. An activity is a personal service activity if it involves the performance of personal services in the fields of health (including veterinary services), law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital isn’t a material income-producing factor.
Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the year.
You didn’t materially participate in the activity under test (7) if you participated in the activity for 100 hours or less during the year. Your participation in managing the activity doesn’t count in determining whether you materially participated under this test if:
Any person other than you received compensation for managing the activity, or
Any individual spent more hours during the tax year managing the activity than you did (regardless of whether the individual was compensated for the management services).
In general, any work you do in connection with an activity in which you own an interest is treated as participation in the activity.
Work not usually performed by owners.
You don’t treat the work you do in connection with an activity as participation in the activity if both of the following are true.
The work isn’t work that’s customarily done by the owner of that type of activity.
One of your main reasons for doing the work is to avoid the disallowance of any loss or credit from the activity under the passive activity rules.
Participation as an investor.
You don’t treat the work you do in your capacity as an investor in an activity as participation unless you’re directly involved in the day-to-day management or operations of the activity. Work you do as an investor includes:
Studying and reviewing financial statements or reports on operations of the activity,
Preparing or compiling summaries or analyses of the finances or operations of the activity for your own use, and
Monitoring the finances or operations of the activity in a nonmanagerial capacity.
Your participation in an activity includes your spouse's participation. This applies even if your spouse didn’t own any interest in the activity and you and your spouse don’t file a joint return for the year.
Proof of participation. You can use any reasonable method to prove your participation in an activity for the year. You don’t have to keep contemporaneous daily time reports, logs, or similar documents if you can establish your participation in some other way. For example, you can show the services you performed and the approximate number of hours spent by using an appointment book, calendar, or narrative summary.
If you owned an activity as a limited partner, you generally aren’t treated as materially participating in the activity. However, you’re treated as materially participating in the activity if you met test (1), (5), or (6) under Material participation tests , discussed earlier, for the tax year.
You aren’t treated as a limited partner, however, if you also were a general partner in the partnership at all times during the partnership's tax year ending with or within your tax year (or, if shorter, during that part of the partnership's tax year in which you directly or indirectly owned your limited partner interest).