Sigh, again someone who doesn't understand the 2/5 year rule after a property has been a rental and spews incorrect information....The capital gains exclusion is pro rated after the house has been a rentalllllllllll...

Is this info incorrect?

@Eamonn McElroy I am in practice and you are incorrect.

You're trying to open up possibilities and break down incorrect assumptions about the problem's limits.

If a step is missed or done incorrectly, you may find yourself starting all over.How the tenant behaves reacts is anyone's guess. 

Both of the previous posts are incorrect, which is why it's important to retain and consult a tax advisor.If you pay a lender $600 or more in interest during the tax year through the course of a trade or business, you should issue them an IRS Form 1099-INT.The post immediately before mine discusses IRS Form 1098, which is an obligation that may fall on the lender and is irrelevant to OP given the context.

Am I not understanding how passive income works on tax returns, or is Turbo Tax incorrectly decreasing my loss before adjusting my entire schedule E, not just the one property. 

Now it’s time to execute...just want to make sure we didn’t structure this incorrectly to backfire later or have to undo tax filings down the road.

@Amber Martin, based on the info you provided, your analysis is incorrect. 

Sending out Loan Mods but never following up and explaining the terms to the borrowersSending out the Loan Mods via most expensive overnight courier and charging you for itTaking 2 months to get out a demand letterOn "Client Managed" loans, emailing you to tell the borrower to send checks to their new address, even though they are charging $55/mthCharging for Payoff statements and other items on loans in Foreclosure that are Client Managed, whereby they do absolutely nothing and still charge $40/mthIssuing incorrect 1099's where interest from the year before was included.