Below, find additional details about the IRS's definition of a real estate professional, including information about a favorable Chief Counsel ruling for licensed agents. 

A taxpayer generally qualifies as a real estate professional for a particular tax year if:

The term “real property trade or business” is defined as “any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business.” (Code Sec. 469(c)(7)(C)) In determining whether a taxpayer meets the material participation standard, the participation of his spouse is taken into account. (Code Sec. 469(h)(5))

The term “brokerage” is not defined in Code Section 469, the legislative history of that section, or any court decision. But the “brokerage trade or business” terminology included in the text of the Code Section 469(c)(7)(C) had been interpreted by the IRS to only count for those with a “Broker’s” license and did not apply to a licensed real estate agent.

The Tax Court looked at the definition in the ordinary and usual (dictionary) sense and has held that a licensed real estate agent's activities counted for purposes of the passive loss exception for qualifying real estate professionals. The taxpayer didn't have to be licensed as a real estate broker to be treated as engaged in the real estate brokerage trade or business. Because she met the material participation standard for qualifying real estate professionals, the agent and her husband could claim losses they incurred on two rental properties they owned. (Shri G. and Sudha Agarwal v. Commissioner, TC Summary Opinion 2009-29)

The IRS, in Chief Counsel Advice 201504010 determined:

In a Tax Court Small Case that cannot be cited as precedent, the Court determined that a taxpayer who was in the mortgage broker business was not a real estate professional under Code Sec 469(c)(7)(C) and therefore losses on his rental properties were subject to the general Sec 469 passive activity rules. While the taxpayer’s mortgage brokerage activity constitutes a “brokerage” trade or business, it does not constitute a “real property brokerage” trade or business, said the Court, because the taxpayer was not brokering real estate; he was brokering financial services. The Court went on to cite legislative history of the statute as supporting this distinction and that Congress considered including “financing operations” in the activities listed in section 469(c)(7)(C) but specifically did not do so. (Guarino v. Commissioner., U.S. Tax Court, T.C. Summary Opinion 2016-12, (Mar. 14, 2016))

In Frank Aragona Trust, (2014) 142 TC No. 9, the Tax Court ruled that a trust that owned real estate properties qualified for the exception for real estate professionals and therefore was not subject to the passive activity loss (PAL) limitations. In that ruling, the Court found that services performed by individuals on behalf of a trust may be considered personal services performed by the trust. The trust's material participation would allow it to avoid the 3.8% net investment income tax on passive activity.