Active participation. You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions.
As long as you participates in management decisions in a bona fide sense, you actively participated in the real estate rental activity. Activities include new tenant approval, rental terms, repairs, capital expenditures, etc.
Even if you use a management company, you will be considered active if you are involved with the operation of your rental.The term "active participation" is a less stringent standard than "material participation."
You must be exercising independent judgment and not simply ratifying decisions made by a manager or management company.To actively participate you do not have to handle every aspect of management. If you approve new tenants, determine rental terms and approve expenditures, you have met the test.
