The passive activity rules are not based on the type of real estate property. Instead, they are based on whether or not the IRS considers you to be a real estate professional. If you meet the qualifications to be considered a real estate professional then the passive activity rules do not apply.
You qualified as a real estate professional for the year if you met both of the following requirements.
More than half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses (see description below) in which you materially participated.
You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated.
Note: Don’t count personal services you performed as an employee in real property trades or businesses unless you were a 5% owner of your employer. You were a 5% owner if you owned (or are considered to have owned) more than 5% of your employer's outstanding stock, outstanding voting stock, or capital or profits interest.
Real property trades or businesses.
A real property trade or business is a trade or business that does any of the following with real property.
Please view the IRS link below for more information.
