He should just take a mortgagee position and the note should have a stated rate of interest (plus points optionally), but no profit participation (which could also trigger the very nasty tax).

(1) The term "Security": means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, traddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a ‘‘security’’, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.(2) The term ‘‘Person’’ means an individual, a corporation, a partnership, an association, a joint-stock company, a trust, any unincorporated organization, or a government or political subdivision thereof.

You would need to be actively engaged in that business and draw a reasonable salary in order to participate in the C-Corp retirement plan. 

—When used in this title, unless thecontext otherwise requires—(1)The term “security” means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement,..............Yes, all notes are securities.

I do not recommend condos for investment unless you are ready to actively participate on the board and have some pull with other unit owners to control the direction of the board. 

Since the pandemic started, we started teaching a hybrid model of both online and in person classes so now people can participate in the class via Zoom.

I have also joined the meetup group so hope to meet you all in August.I have been trying to learn as much as I can, reading tons of books, listening to several podcasts, participating in webinars, taking classes and searching the BP site.

Would becoming a REP and materially participating in rentals reduce BOTH federal and state income tax liabilities of my earned income (W2, 1099, etc.)?

The financial side is only a part of what goes into a property's partnership participation. 

We were in Cupertino during 70's-90's and participated in the exponential growth that lead to our 1031 into a MFU