Steve is employed full-time as a high-school math teacher. He also owns three rental properties; when he has extra time (usually during the summer months) he performs maintenance and makes improvements as needed. He makes management decisions, such as deciding rental terms and approving new tenants. How does Steve classify his rental real estate activity?

Material participation in a business activity.

Material participation in a passive rental activity.

Active participation in a passive rental activity.

Real estate professional with material participation.