Is there a formal rental agreement?

Is the agreement on commercial terms?

Is the rent comparable to FMV?

Is the agreement legally enforceable?

Has your client been actively pursuing the tenant to enforce the agreement, in line with market practice, notwithstanding the family relationship?

As of the end of 2022, is your client still continuing the effort to pursue the tenant and exhaust all avenues for a commercial resolution?

These are some of the question I'd ask to determine whether this is a Sch E activity.