Maybe. The tax code expressly allows certain taxpayers to “elect to treat all interests in rental real estate as one activity.” According to the regulations:
Each interest in rental real estate of a qualifying taxpayer will be treated as a separate rental real estate activity, unless the taxpayer makes an election under [Treas. Reg. § 1.469-9(g)] to treat all interests in rental real estate as a single rental real estate activity.19 A qualifying taxpayer may make an election to treat all of the taxpayer’s interests in rental real estate as a single rental real estate activity [and] this election is binding for the taxable year in which it is made and for all future years in which the taxpayer is a qualifying taxpayer. The election may be made in any year in which the taxpayer is a qualifying taxpayer, and the failure to make the election in one year does not preclude the taxpayer from making the election in a subsequent year.
The tax code defines “qualifying taxpayers” as those who meet the two-prong test to be considered “real estate professionals.” Therefore, only those taxpayers who materially participate in real property trades or business for more than 750 hours per year, and who devote more than 50 percent of their working time during a year to such endeavors, will be deemed “qualifying taxpayers” for purposes of making the aggregation election.
A qualifying taxpayer makes the election to treat all interests in rental real estate as a single rental real estate activity by filing a statement with the taxpayer’s original income tax return [i.e., Form 1040] for the taxable year. This statement must contain a declaration that the taxpayer is a qualifying taxpayer for the taxable year and is making the election pursuant to Section 469(c)(7)(A).22
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