Thanks, @ShirlynW. I can confirm that marking the boxes to indicate that I'm a Real Estate Professional does indeed have the intended effect of allowing me to apply my loss against my ordinary income. Unfortunately, this designation is inaccurate in my case, and I don't feel comfortable making such a designation in my tax return. In any case, such a designation should be unnecessary because the IRS specifies that I can also qualify to apply the loss against my ordinary income on a different basis. From Publication 925:
Rental Activities
A rental activity is a passive activity even if you materially participated in that activity, unless you materially participated as a real estate professional...
Exceptions. Your activity isn’t a rental activity if any of the following apply.
1. The average period of customer use of the property is 7 days or less...
If you meet any of the exceptions listed above, see the Instructions for Form 8582 for information about how to report any income or loss from the activity.
Form 8582 says:
If an activity meets [the 7-day exception above (or others)], it’s not a rental activity. You must then determine:
1. Whether your rental of the property is a trade or business activity...and, if so,
2. Whether you materially participated in the activity for the tax year...
If the activity is a trade or business activity in which you did materially participate, report any income or loss from the activity on the forms or schedules normally used. If the rental activity didn’t meet any of the five exceptions, it’s generally a passive activity.
In my case, my length of stay was less than 7 days on average, the rental is a trade or business activity, and I did materially participate.
Unfortunately, TurboTax does not ask any questions to this end. It seems to be completely unaware of the 7-day rental period exception (and others I omitted).
