Your firm just received new clients, Robert and Catherine Tate, a married couple who have filed a joint return for many years. Robert is 67 years old and retired. Catherine, 63, is a licensed real estate agent and still works part-time for a real estate brokerage firm. She worked 625 hours in that capacity during 2021.

The couple acquired 2 rental properties early in the year. They actively own and operate the three properties. The projected 2021 financial results for the properties are shown below.

	112 Willow Street	422 2nd Avenue	1352 W. Harmon Avenue
Rents Received	$28,800	$58,500	$82,000
Rental Expenses	44,000	66,000	74,000
Rental Profit or Loss	(15,200)	(7,500)	8,000

The Willow and 2^nd Avenue properties experienced some difficulties this year. Significant losses occurred with those properties due to vacancies during the year, extensive cleanup costs, some eviction and nonpayment experiences, and some repairs and new costs of fixtures and appliances. The couple acquired the Willow and 2^nd Avenue properties very early in the 2021 tax year. In the prior year, they had only the Harmon property. They have never made any particular tax elections regarding their rental properties because they only had one property in the past.

Although the couple does hire outside people to help with some of the maintenance and legal issues, the couple does actively manage and work on these properties. Most of the working hours were performed by Robert but Catherine also worked some hours on managing and maintaining the properties. Their time spent on the properties during 2021 is well documented and consists of the following number of hours by each person:

	112 Willow Street	422 2nd Avenue	1352 W. Harmon Avenue
Hours worked by Robert	200	120	60
Hours worked by Catherine	100	30	20

Other income of the couple is as follows:

Taxable pension income	85,000
Catherines commission on real estate sales	30,000
Taxable social security income	38,500
Other taxable investment income	10,000
Total Adjusted Gross Income w/o rental	160,500

Do the Tate's count this as a passive activity or a trade or business? Why?