Interesting. As I understand it, the major considerations of "Trade or Business" tend to be active management, and if the property owner is actively managing the rentals and/or derives a significant portion of their income from the rentals this condition is met, while completely passive management could classify the rental income as investment rather than business income. Does that sound about right?

That is definitely PART of it, but again, it is a 'gray area', with no clear-cut answer.


An except from the DRAFT Publication 535 ... notice the word "extensive":

"The  ownership  and  rental  of  real  property doesn’t, as a matter of law, constitute a trade or business, and the issue is ultimately one of fact in which the scope of your activities in connection with the property must be so extensive as to give rise to the stature of a trade or business."
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-dft/p535--dft.pdf#page=3">https://www.irs.gov/pub/irs-dft/p535--dft.pdf#...>