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@tccpg289 wrote:

The rental income is short-term in nature, thus they do not need to classify it as a passive activity when incurring losses.

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Not necessarily.  The short-term rental means it is not considered a "rental activity" for purposes of the Passive Loss rules.

So then you go to the 'usual' rules:  Does the taxpayer Materially Participate?  If yes, non-passive.  If no, passive.

Then the next question is do they provide "services" to the tenants?  The Regulation specifically mention maid service and meals as "services", but there could be other things that would be considered as services.