Hi- I'm filing taxes for someone with the following scenario:
- Was a self employment independent contractor Jan-March 2020
- Due to covid impacts this contracting work stopped producing income, so claimed unemployment starting March-December
- Joined an existing S corp as a 20% partner in June. The S corp produced ~20K in income during the year, and their allocation at 20% was about 4K. They do not receive any W2 wages from this place.
Question- are they able to say they "materially participated" in the partnership, considering that they claimed unemployment March-December? Material participation is obviously beneficial in getting a better refund, however I am unsure if that conflicts with the fact that they were receiving unemployment benefits. Thanks in advance for any advice!
