Oh, I think I see how this is handled.  The suspended passive losses are released and propagate onto the form from whence they came, Schedule E.  They show up on line 22, "Deductable rental real estate loss".  From there they are netted against the Schedule E gain/loss and propagate to the 1040, line 7a.  So this effectively allows them to offset ordinary income.  Just-Lisa-Now gave me an important clue and that was make sure Box H, "Complete taxable disposition", on Schedule E is checked.  So why didn't somebody just say that in the beginning?  Thanks for your help.