Do PALs from RE offset capital gains from stock dividends and another question

[Becca F.]

I have been doing my own taxes and have a large amount of Passive Activity Losses from my rentals, don't want to mention the specific number but it's a lot in the thousands. I'm a W2 employee, all long term rentals, no STRs.

#1) If I have capital gains from stock dividends and interest income (high yield saving accounts, etc) are those offset by my PALs. Someone told me it doesn't. I have been buying stocks, index funds, and Master Limited Partnerships (which I will get a Form K-1). I would consider investing in stocks and index funds to be passive. Why does the IRS consider it ordinary income? Would ordinary income include my W2, stock dividends and interest income? 

#2) Why is everyone I know buying STRs and doing accelerated and bonus depreciation? I assume the STR loophole is to to offset active W2 income. If go buy a property for STR, can I then unlock all the PALs from previous years for my LTRs? That seems like a huge headache, managing an STR from out of state and meeting the material participation hours from OOS. Buying a property in the Bay Area to STR would cost over $1 million. I don't see the point of all these investors doing STRs for the tax savings, for higher cash flow OOS, it does make sense. I haven't done any cost segs on any of my SFH rentals. I thought unless you're REPS it doesn't make sense to do cost seg, and accelerated and bonus depreciation. Am I missing something here? I'm confused.

[Sean O'Keefe]

There's a lot here - I'll focus on the misconception below:

Question: If go buy a property for STR, can I then unlock all the PALs from previous years for my LTRs?

Answer: No, buying an STR doesn't change the nature of historical passive losses on other LTRs you own and carried forward from prior tax years