162 does not define businesses eligible for the QBI deduction - rather the tests come from court cases and other IRS pronouncements,
the safe harbor rule
If a taxpayer’s rental real estate activity meets the safe harbor, then it will be treated as a trade or business for purposes of 199A.
The safe harbor sets out requirements that must be met, and includes several exclusions and caveats
The Safe Harbor – Specific Requirements
- Separate books and records must be maintained to reflect income and expenses for each rental real estate enterprise (“RREE”).
- At least 250 hours of rental services must be performed each year with respect to each RREE.
- The taxpayer must maintain contemporaneous records, including time reports, logs, or similar documents, regarding the following: (i) hours of all services performed; (ii) description of all services performed; (iii) dates on which such services were performed; and (iv) who performed the services. Such records must be made available for inspection at the request of the IRS.
Books-and-Records Requirement.
The safe harbor also contains rules that permit a taxpayer to aggregate separate properties and treat them as a single RREE .
250-Hour Requirement.
Each RREE must satisfy the 250-hour requirement. Specifically, rental services include:
- advertising to rent or lease the real estate;
- negotiating and executing leases;
- verifying information contained in prospective tenant applications;
- collection of rent;
- daily operation, maintenance, and repair of the property, including the purchase of materials and supplies;
- management of the real estate; and
- supervision of employees and independent contractors.
Moreover, rental services can be performed by owners, employees, agents, and/or independent contractors of the owners. Accordingly, it will become very important that vendors who perform services that could be counted towards the 250-hour requirement provide documentation.
The above list does not purport to be exhaustive. Specifically excluded are the following activities: financial or investment management activities, such as arranging financing; procuring property; studying and reviewing financial statements or reports on operations; improving property under §1.263(a)-3(d); and hours spent traveling to and from the real estate.
here's a link to the regs
https://www.irs.gov/pub/irs-drop/td-reg-107892-18.pdf
which are wishy-washy as to whether the rental real estate qualifies if the safe harbor rules aren't met. See section 3. in effect, if you don't meet the safe harbor rules, it is a judgment call.
here's the subpart I think is important (page 16)
In determining whether a rental real estate activity is a section 162 trade or
business, relevant factors might include, but are not limited to (i) the type of rented
property (commercial real property versus residential property), (ii) the number of
properties rented, (iii) the owner’s or the owner’s agents day-to-day involvement, (iv) the
types and significance of any ancillary services provided under the lease, and (v) the
terms of the lease (for example, a net lease versus a traditional lease and a short-term
lease versus a long-term lease).
Providing bright line rules on whether a rental real estate activity is a section 162
trade or business for purposes of section 199A is beyond the scope of these
regulations. Additionally, the Treasury Department and the IRS decline to adopt a
position deeming all rental real estate activity to be a trade or business for purposes of
section 199A.
