Tricky situation...in a very uneducated guess I would assume the life estate would revert  back to original owner and not to daughters declared in will. 

You can have a bag of worms there accounting wise, taxable income from your payments, taxable income from the use of company assets to owners/employees of company assets, using a sham transaction so that you can declare depreciation won't look real good either.

Based on the below specifics can we (specifically my realtor wife) be declared as a real estate professional for tax purposes for our rental.A little more detail on our situation. 

I have been to Tax Planning Seminars for Stock Traders where they try and get you to jump through hoops to make your trading easy to keep track of and be declared a Trader.

You're wondering if the flip of which you own 50% thru the partnership is required to be declared as collateral against your own EIDL loan.

The thinking being that while people may play a bit fast and loose with representations or declarations, no one wants to screw with the IRS.

We have a clause in our lease agreements that requires tenants to obtain a renters insurance policy and also send us a copy of the declarations page every 6 months.We don't specify limits, as the amount of coverage is largely dependent on the value of their belongings.We also require a pet rider on the policy if they have a dog in the house. 

My humble opinion is that you really need to develop budgeting muscles.  

If it was then you would have to declare it as income or amend your tax return to increase the taxable gain from the sale.

I do not want pets in my rentals either so I have a 'no pet policy' that gets declared up front in the ad.