Using more correct terminology, the question is whether you materially participate in the condo rental business.

FORBES: Why 'Material Participation' Can Be Your Ticket To Tax Deductions

The IRS usually says you must spend a minimum of 500 hours working on each property to materially participate a very tough standard to meet.

FORBES: How Real Estate Investors Can Protect Themselves From The IRS

It may appear that ramping up your hours to materially participate in an activity is a no-brainer, because by converting the activity from passive to nonpassive, you can pull the resulting income out of the computation of net investment income and save an extra 3.8% in tax.

FORBES: Overview Of The New 3.8% Investment Income Tax, Part 2: Passive Activities

To illustrate, if a taxpayer owns an interest in an S corporation that earns a certain amount in income and distributes half the sum to the taxpayer, the taxpayer would include the amount in his calculation of the NII sum if he does not materially participate in the S corporation.

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