Real Estate Rentals are automatically passive unless there is a special provision to treat them as non-passive (such as self-rentals, rental of land, and Real Estate Professionals).  Active and/or Material Participation do not change that.

So by default, the passive losses are not allowed and are carried forward on Form 8582.

If the taxpayer "actively" participates there is a special provision to deduct up to $25,000 of passive losses *IF* the taxpayer's income is under $150,000.  Because your taxpayer's income is over $150,000, your taxpayer does not qualify for that provision.