Correct, not passive but is it material participation, that is the crux of the situation. Please see where IRS Pub 527 for Rental Property lists these rules:
Real estate professionals. If you are a real estate professional, complete line 43 of Schedule E. You qualify as a real estate professional for the tax year if you meet both of the following requirements.
• More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate.
• You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate.
If you qualify as a real estate professional, rental real estate activities in which you materially participated aren’t passive activities. For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity. Don’t count personal services you perform as an employee in real property trades or businesses unless you are a 5% owner of your employer. You are a 5% owner if you own (or are considered to own) more than 5% of your employer's outstanding stock, or capital or profits interest. Don’t count your spouse's personal services to determine whether you met the requirements listed earlier to qualify as a real estate professional. However, you can count your spouse's participation in an activity in determining if you materially participated.
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