The FTB says a partnership must file if they are "engaged in a trade or business". 

I think you should engage a professional. 

At that point they end up engaging the more knowledgeable tax professional to fix the mess and end up paying him/her many multiples of what they'd have paid just going with that professional from the start. 

If you wanted to pursue a like-kind exchange (aka 1031 exchange), you needed to engage a specialized company called a qualified intermediary before you sold the property.

Eamon,If the S-Corp is engaged in the trade or business of rental real estate, it will not be considered passive. 

Stay active on the site and engage the community.

@Charlene Stovin. if you are a new Investor / Property Owner, would suggest you engage a competent Real Estate Agent with experience in leasing properties to assist you with the initial lease up. 

As long as you are taking into account the proper repair budgets, engagement and other variables you can do well.

I’m arguing for us to take a step back and see that we are engaging in the wrong conversation here.

And I agree with @Dave Foster, if it doesn't financially make sense for you to do a 1031, you don't want to continue to own real estate or you're not finding good deals out there, definitely reasons to not engage in an Exchange.