Quote from @David Brooks: I've received advise that our friendly STR loophole can not be used to characterize STR income/loss as non-passive on a California tax return. 

Unless you can weather a storm of bad ROI for the next few years I say you cut your losses. 

But, given that he has a primary residence there already that he must leave (Army doesn't give much choice on location), if he isn't able to sell the property quickly for at least break even, and can't take a deduction for a loss, my thinking is to flip it to a rental (question is which kind makes the most sense), he should be able to cash flow given his monthly expenses, even if only $100/mo, then if he still sells for a loss in a year or two, he could take a deduction.  

This is also called gambling. 

This creates two loan payments ($100,000 of equity and $300,000 on the new mortgage).Key NumbersHome Equity Loan Interest Rate: 6%Mortgage Interest Rate: 7%Rental Income: $3,000 per monthExpenses (management, taxes, insurance, maintenance): $800 per monthIncome and ExpensesMonthly Rental Income: $3,000Monthly Expenses: $800Monthly Mortgage Payment: $2,000ExplanationThe investor earns $3,000 in rent each month.They pay $2,000 on the investment property mortgage and $800 on other expenses.This leaves $200 profit each month or $2,400 per year.However, you have to pay $6,000 interest on the equity borrowed.This leaves you with an annual loss of $3,600.While the rental property generates positive monthly income, the interest cost of borrowing the initial $100,000 results in an overall loss.

The IRS in its Passive Activity Loss Audit Technique Guide published a sample Activity Log.  

., selling at a loss or using a 1031 exchange).

or loss? 

.- Material participation rules still apply: If you meet the IRS material participation tests, losses from a short-term rental can be treated as nonpassive, allowing them to offset W-2 or business income.

For most people you will only save a little money on any PROFITS if you have a loss the first year.