Kathy,

You would will Schedule E reporting those rental transactions, that is reporting the total rental incomce, and rental expenses, (property taxes, mortgage interest, associatioin dues etc) in addition you can claim depreciation of the building.

If it appears that there is a net loss, this loss may be deductible subject to certain income limitation requirements. Your accountant is correct when he said that these losses are not deductible in the current year, if your adjusted gross income exceeds $150,000 for married filing jointly taxpayers!

However, these losses are suspended for use in future years and may be deductible against other passive income generated from other more profiable rental properties activities.