Perhaps you should take some CE credits on the subject, and here is a link to pub 925. There is an exception that allows a $25000 loss which is shown in pub 925. Also, in pub 925 you will find the definition of a Real estate Professional.

https://www.irs.gov/publications/p925.

PIGS/PALS came into being 1986/87 if I remember correctly.

And I remember takes WEEKS of classes to properly address the issues involved.

As was mentioned above, there is A LOT involved, so start with Publication 925. After you've read through that a couple of times, feel free to ask us any specific questions that you couldn't figure out in the Publication.

Am I right in saying one of the big stumbling blocks are whether or not the owner is an active participant in the operation of the rental property or not?

No. Active participation and AGI under $150,000 can get you the exception that allows up to $25,000 losses to be deducted.

The starting default position is: Rental real estate is a passive activity.

In 1987 I wrote an 8 hour course for in-house training on the PAL rules. Aggregation, dis-aggregation, YIKES!

THANK GOD! they have been simplified since.

Phase ins, too?

Fun times.

Some called it phase in, some called it phase outs.