Real estate, by default, is passive and the primary way to avoid the passive loss rules is to qualify as a real estate professional.Full-time employees and non-real estate business owners cannot qualify as a real estate professional (aka REPS status) because one of the tests is to spend more time in real estate than anything else (and it’s unlikely that you can convince the IRS or Tax Court that you spent more time in RE than your day job).

Assuming you don’t meet the 500 hour test, you will likely need to document the time of others spent working on your property.In addition, you need to have guests at your property as well.Until you are 100% sure you can utilize the short term rental loophole, I’d wait to do the cost segregation study.

Quote from @Delbert Standifer: @J Kilroy greetings I just spent 200k on my ADU.

I spent 2.5 years getting all the utilities to the property.

Spent majority of my adult life (2 decades) working with adolescents on Young Life staff.

The issue ended up was with the drain pan, so the plumber spent time driving to Home Depot.

We will not work with anyone who has not been to Milwaukee and spent at least a couple days with us, so we can get on the same page on asset and neighborhood quality. 

They have stepped in to cover repairs for me, pressured mngt to do the same, introduced me to other PM teams that would perform better, shared multiple resources with me to assist with the sale of the properties and have spent ample time helping me strategize overall about what to do with these properties.

I am staying steadfast on my response and not backing down (I spent 25 years as a GC/developer fighting with contractors) and have seen this thousands of times. 

I am looking for a way to log all the hours and activity spent on the properties. 1.