You need to indicate that you are "at risk" in the venture, which it sounds like you did. The deduction is phased out for income between $100,000 and $150,000, which it also sounds like you have. You also need to be active in the business. For the at risk and active participation qualifications, you need to answer questions about those things in the program, which I assume you have. I suggest you look at form 8582 which reports your passive losses before you file your tax return as that would show how your passive rental loss is being handled.
If the loss is denied, you will carry that forward and you can use it in the year you dispose of the business. It will actually be deducted against ordinary income in that year, so it will not be added to the basis of the property, but you will get to deduct it in that year.
@Diane in MT
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