Hello and thank you for your question.
You will want to become intimately familiar with Internal Revenue Code (IRC) § 469. Your comment, "this guy has losses," indicates that you are preparing tax returns for compensation. If that is the case, then given that §469 is a common and fundamental Code section, I suggest you read it in its entirety. If you prepare enough returns and want to bolster your understanding to more of an intermediate level, you would go on to read much of the corresponding regulations (Reg. §§ 1.469-0 through 1.469-11). Seasoned tax professionals will have read the Code and Regulations in their entirety many times over before delving into the many relative court cases and other applicable sources dealing with these rules. I say this not to chide you, but simply to give you some perspective.
To answer your question directly, being a real estate professional has little bearing on whether or not your client's S-corp activity will also be considered a passive activity within the meaning of §469(c)(1):
(c) Passive activity definedFor purposes of this section—
(1) In general
The term “passive activity” means any activity—
which involves the conduct of any trade or business, and
in which the taxpayer does not materially participate.
If your client is conducting a trade or business through an S-corp then the question boils down to whether or not your client materially participates in the S-corporation's activities. Material participation is somewhat loosely defined in §469(h), but the general requirements are that your client's participation be regular, continuous, and substantial. To get a better feel for what that actually means, you would want to reference Reg. § 1.469-5 and Temp. Reg. § 1.469-5. For your purposes, I'll quote Reg. § 1.469-5(k), Example 5:
Example 5. In 1993, D, an individual, acquires stock in an S corporation engaged in a trade or business activity (within the meaning of §1.469-1(e)(2)). For every taxable year from 1993 through 1997, D is treated as materially participating (without regard to §1.469-5T(a)(5)) in the activity. D retires from the activity at the beginning of 1998, and would not be treated as materially participating in the activity for 1998 and subsequent taxable years if material participation of those years were determined without regard to §1.469-5T(a)(5). Under §1.469-5T(a)(5) of this section, however, D is treated as materially participating in the activity for taxable years 1998 through 2003 because D materially participated in the activity (determined without regard to §1.469-5T(a)(5) for five taxable years during the ten taxable years that immediately precede each of those years. D is not treated under §1.469-5T(a)(5) as materially participating in the activity for taxable years beginning after 2003 because for those years D has not materially participated in the activity (determined without regard to §1.469-5T(a)(5) for five of the last ten immediately preceding taxable years.
The above example highlights the use of Temp. Reg. § 1.469-5T(a)(5) to assert that your client materially participates in his S-corp activity for up to five years after having failed to meet the other standards by which he might be considered as having materially participated in the activity:
§1.469-5T Material participation (temporary).
(a) In general. Except as provided in paragraphs (e) and (h)(2) of this section, an individual shall be treated, for purposes of section 469 and the regulations thereunder, as materially participating in an activity for the taxable year if and only if—
(5) The individual materially participated in the activity (determined without regard to this paragraph (a)(5)) for any five taxable years (whether or not consecutive) during the ten taxable years that immediately precede the taxable year;
If the above provision does not apply because, e.g., your client did not materially participate in his S-corp activity for five years, then you will want to look to the other possible standards under Temp. Reg. § 1.469-5T(a)(1)-(7). Perhaps there is an alternative solution beyond that, such as if your client's spouse materially participates in your client's S-corp activity, given that "In determining whether a taxpayer materially participates, the participation of the spouse of the taxpayer shall be taken into account" (§469(h)(5)).
If your client's goal is to in fact be deemed as having materially participated in the S-corp activity, then once you have obtained a thorough understanding of these rules, you will generally be able to advise your client on how to meet that objective. That is the correct way for you to proceed, noting if your client is a good one, you will end up being paid a reasonable fee for your research (provide a written tax memorandum) in addition to any fee you are charging to prepare the return. It would take me about a half hour to generate a decent memo, if you want to gauge your time against mine for billing purposes.
Finally, you have stated that the classification as a "real estate professional" is an "election." Taxpayers either meet the criteria of §469(c)(7) or they do not. It is not an election. In general, your client may meet the criteria if your client spends at least 750 hours a year performing services for real property trades or businesses and that time suffices to comprise over half of the time your client otherwise spends providing personal services for all of your client's trade or business activities (§469(c)(7)(B)). Under §469(c)(7)(A), your client may elect to treat all interests in rental real estate as one activity for purposes of meeting these requirements.
The following links may be helpful:
Reg. § 1.469-5
Temp. Reg. § 1.469-5
I trust that you will have found your answer. Best of luck and thank you again.