A good real estate accountant can save you thousands of dollars by leveraging entity selection and formation, tax deductions, cost segregations, bonus depreciation and tax planning.I recommend finding an accountant specializing in real estate taxation, business taxation, financial planning and tax planning.Consider working with your accountant remotely to expand your options.I would also recommend looking for an accountant willing to work with you throughout the year.

Interest income is interest income, unless you decided to roll some of the current cash into a self directed IRA at which point your interest income would be deferred for a later time and allow your funds to grow tax free.

Oh I agree with you if that rent will be a business income to live on vs just an unrealized gain.

They remain distinct on Form 1040 with different tax treatmentOnly capital losses can offset capital gains (except for the $3,000 allowance)So even though material participation makes the loss non-passive, it's still an ordinary loss that cannot offset capital gains from stock sales on the return.The only way capital losses can become ordinary is upon the sale of your property, and that loss could offset your W2 salary.  

Unfortunately, no one is "allowing" them to operate, @Stylianos Kalamaras.

My business partner is able to issue IUL.

Or are we allow them to continue to  purchase these properties, let the value go up, then sell them tax-free?

Every day is a school day in this business.

I took two business law courses in college. 

I use Foremost for my mobile home investing business with the properties I buy and hold.