Can income from sale of rental property (held for more than 1 year) be treated as an ordinary income if rental income/exp were reported as non-passive in previous years

[JulieH1]

If you are a real estate professional or the rental was classified as an active business then it can be ordinary income.

Tax law specifies that all rental activities are passive activities, even if the landlord is a material participant unless the taxpayer is a qualified real estate professional or the rental businesses are classified as active businesses by the tax code.  

Hence, losses from rentals can only be deducted from other passive income. Rental income is any income received for the use of tangible, either real or personal, property. The tax code provides material participation rules that distinguish active from passive activity. If at least 1 of the material participation rules is satisfied, then rental income can be classified as active income only if it satisfies one of the following exceptions; otherwise, it must be classified as passive income even if the taxpayer is a material participant. However, there is an exception for deducting up to $25,000 of rental losses against active or portfolio income if active participation tests are satisfied, even if the material participation tests are not. However, the $25,000 rental loss allowance phases out for taxpayers with incomes exceeding $100,000, phasing out completely at $150,000.