Hi --

My client is putting down $200,000 in earnest money on a large commercial rental property. If he loses that money, how do I report it?

I think it would be a capital loss, but a capital loss from a passive real estate investment would normally be suspended until the building is sold. In this case, the building is not being sold--since he never actually acquired it.  

How to report this?  And will he get to use the $200,000 loss against ordinary income in the current year?

Thank you!