Does your client qualify as a real estate professional?

Real estate professionals are defined as taxpayers who conduct over 50% of their personal services in real estate activities in which they materially participate and where they spend at least 750 hours of time under Sec. 469(c)(7)(B) of the Omnibus Budget Reconciliation Act of 1993. Only those activities where the taxpayer materially participates qualify for exclusion, with the term material participation having the same meaning as its definition under the general passive activity rules. The activities cannot be grouped with any other activity in gauging the hours of service performed within any one activity. Individuals who wish to claim exclusion under Sec 469 rules must be able to substantiate their position.
The 1993 Budget Reconciliation Act contained a provision that excludes certain rental real estate activities of real estate professionals from the passive activity rules. You may be surprised to find [...]