Hi and thanks so much for your response. You state that this "is a rental activity with active participation." But in reading the Active Participation criteria, we do not appear to meet them. Here's what is in TT:
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You meet the active participation requirements if:
1) You (including your spouse if married filing jointly) own at least 10% of the activity during the entire year, [WE DO NOT] and
2) You are significantly involved in making management decisions or arranging for others to provide services. You do not necessarily have to be involved in day-to-day operations, but you must participate in a significant way in making decisions such as approving new tenants, deciding on rental terms, or arranging for others to provide services (such as repairs). [WE ARE NOT]
The second exception to the passive activity rules is if you are a "qualified" real estate professional working in a real property business. [WE ARE NOT]
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Based on the above and your response, it seems we should answer:
Did You Actively Participate? NO
and...
No. This rental doesn't require special handling.
Does this appear correct? Thank you!
