Conclusion
It is our opinion that the determination of trade or business for rental activities should be based on Sec 162, and the safe harbor used sparingly and only where there is doubt under Sec 162, if at all. Our research of court cases upon which Sec 162 is based indicates most rental real estate activities are trades or businesses.

Consideration should be seriously given to the proper treatment of each activity under relevant case law with the conclusion that, except for exceptions outlined above, a rental real estate activity will be a trade or businesses. Consistency for both net profit and net loss activities is appropriate.

But of course, how you handle this mess is entirely up to you. Court rulings are certainly in our future but that will take a number of years to play out.

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