Below, find how the IRS defines a real property trade or business for federal tax purposes. This definition is particularly important for real estate professionals.

A real property trade or business is: any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing or brokerage trade or business. (Code Sec. 469(c)(7)(C)) The determination of a taxpayer's real property trades or businesses is based on all relevant facts and circumstances. Once a taxpayer determines the real property trades or businesses in which personal services are provided, he can't redetermine them later unless the original determination was clearly erroneous or there's been a material change of facts and circumstances. (Reg § 1.469-9(d)(1))