I’ve been listening and reading about Tom Wheelwright’s suggestion on cashing out on 401k/IRA and taking the penalties and investing it in real estate since new tax laws would be in favor of investors.With new tax laws (2017) and the many deductions (bonus depreciation and doing a Cost Segregation), would passive investors benefit by cashing out their previous employer's 401k or traditional IRA to invest in real estate?

It's not determined by an official law or a "legal" situation. 

You’re operating in a legal grey area or you’re breaking the law (depends on the state) and an agent isn’t, because they’re licensed.

It all depends on the state and local laws, so a good attorney familiar with title issues would be very beneficial at this stage. 

And I did note that some of the tax  statements contained an exclusion (per the new tax law) for Qualified Business Income which I assume is a benefit to investors...but again, I'm not a CPA.

How much you will be charged depends on several factors.Are you investing in a state with a complex tax return/tax laws.New York, California, New Jersey have slightly more complex returns/laws than say Pennsylvania or Maine.Are you generating a loss from the syndication which requires complex NOL/Passive loss carryforward forms. 

How is it as a state in terms of tenant-landlord laws?

My wife and I have just finished converting our mother-in-law suite into a cozy little studio apartment, we threw it on Airbnb and it is getting booked up like crazy.

Did you try American Heritage - a Credit Union.  

We’d be selling to a third partner, who would then own 93% of the LLC.Can anyone explain or suggest a reading list to learn about the applicable tax law?