Note by IRS: "However, you may be classified as an "active participant" in your rental properties, which gives you a limited ability to claims some loss. If you actively participated and you have a modified adjusted gross income of $100,000 or less, you may be able to claim as much as $25,000 of rental property losses on your your taxes.
This was the HEART of the Dr. Edwin Curphey case against the IRS, which he won. The court ruled that an investor collects money without having to perform any work (passive income) and that a business owner actively works with a property. That means to be considered a business, you need to show the IRS that you do more than simply handle money. Look at the article by Kim M. Larsen ES CTFS. See cases:Neill v Commr., 46 BTA._ and Curphey v Commr., 73 TC 766._ and Reg. Section 1.1402(a)-4(c)(2)._ and Hamacher v Commr., 94 TC 348.
