mike47401 -- There is a distinction between the terms "passive activity" and "material participation." For non-business owners, all rentals are passive activity. The operative concern here is whether a taxpayer's rental activity is a "business" or an "investment" and whether or not the taxpayer must issue a 1099-MISC to the property manager. There is a very good series of paragraphs outlining the implications of rental activity, passive activity, material participation, and business definition; (about 10% down the page beginning with the section titled "passive activities") in the IRS overview of Publication 925 at:
<a rel="nofollow" target="_blank" href="
http://www.irs.gov/publications/p925/ar02.html">http://www.irs.gov/publications/p925/ar02.html</a>
In particular, note the following sentence from that page:
"A trade or business activity does not include a rental activity or the rental of property that is incidental to an activity of holding the property for investment."
