@mpsingh08 ,
1. the only advantage /effect of being a realestate person when renting out properties is theat you losses are not limited i.e. Passive Activity Loss limitation does not apply. However, a business to remain a business , in the eyes of the IRS ( rather than a hobby where effectively no loss recognition is extremely limited) must show profit in at least two of five years { if my memory serves me correctly }.
2. I think we are getting distracted by the term "income" --- IRS uses Gross income as income which may be different from taxable income. Thus a rental property could have a gross income of $12,000 on Schedule -E but the taxable income may be negative i.e. allowable expenses plus allowable depreciation exceeds the gross income. Thus when we are talking about foreign rental it is the gross rents that is counting as income for purposes of foreign income and for foreign tax credit on recognition on form 1116. It is quite possible that an investors holds on to a foreign income property even when the property does not pay for itself -- i.e. a loss on cash flow basis because of unrealized capital gain for future usage or unrealized capital loss for use against gain for other investments for US tax purposes. So let us recognize that when I said "as long as there is foreign income" I really did mean foreign gross income ( from US perspective ) and not taxable income --- US tax laws operate without effects of foreign tax laws except where double taxation amelioration occurs due to US - other country tax treaty.
Does this make sense and/or is there more I can do for you ?
Namaste ji
pk
