What was your reason for only reporting the net income on prior-year Schedules E?  

The tax is on income, not on pieces of paper.

If IRS looks at ten other owners in the neighborhood and finds them reporting $5,000 a week during the season, what are they going to think about your client reporting only $2,000 ?

And how do they know the "management" expenses aren't being paid to her boyfriend?  

Is she claiming a loss on these units?  A $10,000 loss looks less suspicious when gross is $100,000, not $40,000.

But the bottom line is still, she's a mental case.  Probably abused as a child.