I'm hoping someone can help with this. A few years back I invested money into a private fund that purchased a property. They would issue K1's to all the investors as part of the LLC. It would basically be 0 income, 0 loss. So no big deal.

Recently, the LLC basically had the property foreclosed and the recent K1 issued showed a -$10K loss in box 1, Ordinary Business Income (Loss).

My confusion is, is this something I can claim as an active loss? I wouldn't say I actively participated in anything other than handing over money. However, the money is now all gone. It is liquidated and so is the asset (property). So unlike a rental, I could never sell it and then claim the loss at a time of sale.

If I have to claim this as passive, when would it actually help offset income?

TIA!!