Thanks, Skylane. That's pretty much what I was assuming also. That it would be a capital loss.

But then what?  It probably becomes a suspended loss, because it's passive. But then you get to take suspended losses when you sell the property. In this case, there isn't really a sale, of course, since there was no purchase.

I saw instructions in TaxSlayer blog that said to enter it as if you bought the building for $200K and then "sold" it for $0. That way the property is disposed of, for tax purposes, and you can recognize the loss. 

I wouldn't know how to enter that into Intuit ProSeries Basic, though.

And of course I'd like some corroboration that this is a legitimate treatment also.