The Nose Genre
So how exactly do you figure out when you're reading magical realism and not some other genre that's got weird stuff in it, like fairy tales or sci fi? This might come as a bit of shock, but the very first thing to do is to see if there are magical or supernatural elements in the thing. (Hint: a nose walking around living its own life counts as a supernatural element.)
Now, once you've found your magic thing, the next thing to do is to eliminate the markers of other genres. Are there fairy tale creatures there? Dragons, witches, that sort of thing? No? Ok, scratch off fantasy and fairy tale. Next, are there wise, talking animals or some inanimate objects teaching you right from wrong? Not so much? Ok, then you're not dealing with a parable or a fable. Finally, is it set in some distant future where the technology is so advanced it might as well be magic? Yeah, not in this one, so it's not hard or soft science fiction either.
The final test is probably the most subjective. Take a good look at your text and try to eliminate the one magical thing. Is the story as realistic as possible in every other way? Now, put the magic thing back and take one last look. Do the characters in the story react to the magical as some crazy insanity-causing nonsense, like we would in the real world? Or do they just shrug it off as nothing to write home about?
In this story, for example, there is a nose just walking around like a person. And also there is a guy walking around with no nose on his face and no mark that shows that a nose ever existed there. Now, if you saw either of these things on your street, you would… yeah, freak out. But in Gogol's world? Everyone just gives it a "meh." And, bingo—that's magical realism.