Client wanting to show rental income & expenses on Sch. C

The following is from the I.R.S. web site on Reporting Rental income. I think this is where the taxpayer is coming up with this.

"Generally, Schedule C is used when you materially participate in your residential rental activity.
Providing substantial services -
If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C, Profit or Loss From Business, or Schedule C-EZ, Net Profit From Business."

I'd like to see a link to that site.  It doesn't make sense to me.

tp12345- Which of the following services noted below does your client provide for the tenants?  I doubt any.   They still get the $25,000 subject to the 150K income phase out.  Which they have not adjusted for inflation since it was put into place.  Write your congressman about that, and have your clients write him/her too!!!

"Generally, Schedule C is used when you materially participate in your residential rental activity.
Providing substantial services -
If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C, Profit or Loss From Business, or Schedule C-EZ, Net Profit From Business."
 

First, here's the link Archie asked for -

http://www.irs.gov/publication...

What you point out may be the catch.  That what the I.R.S. is referring to here is something more like a B&B.  The guy claims to change the linens but I've been doing their taxes for a number of years and they'd never mentioned it before.  I ran across something in a tax book about having to make an election on "the original" return.  Doesn't specify what "original" exactly means but I assume they mean on the return when they start renting a particular property out.  In the case I'm dealing with it would be changing horses in mid-stream a bit.

If he is a real estate professional, he could deduct all losses.  $25,000 limit does not apply.

If he meets the material participation requirements, then he can take some of the loss. It still goes on Sch E.

They could take some of the losses if modified AGI is less than $150,000

 As Dusty said, and I would add, "Is the only person who does those things?"

That's what they're claiming.  That the husband is the only one maintains these six units (3 in each house).

He lives next door to the 2 rental houses.

Material participation doesn't seem to be a problem as the guy apparently spends over 750 hrs/yr. on the rentals and has no other job or employment.  I've been doing taxes for many years and have never tried to slide rental income over to Sch C so I'm not real comfortable with it.  But then I see on the I.R.S. web site, "Generally, Schedule C is used when you materially participate in your residential rental activity."  So I've been looking for something in black and white that says they can't or shouldn't.

The other types of rental businesses that you would put on a Sch C is like a Rent-All, U-Haul, Video rentals, party rentals, tent rentals. These are businesses that are "rental" businesses reported on Sch C not E