I'm sorry for your loss. If the deceased person passed away, is this property being inherited by someone? Usually someone specified in the will of the deceased, or to a descendant in accordance with state law.
Additionally, I assume the deceased person's estate (they have an estate, since they have property) went into probate, which usually requires the deceased person's assets to be transferred to an estate. Then the legally recognized/appointed administrator of that estate is required to file a "final" 1040 for the deceased, covering everything up to the date of their passing, and transfer everything into the estate. Then the administrator would be completing a 1041 Estate return.
Basically, the carry over losses carry over to the estate and included on the estate return. How those losses are dealt with on the estate return, depends on how the dissolution of the estate is handled.
Have you considered seeking professional help on this? If the residence of the deceased was a state that taxes personal income, things can get quite complex. So professional help might be the more cost effective way to go here.
