If a property is making no cash-flow, when depreciation is factored in it is a paper loss on your taxes.

Sam,I would add a couple things from the Insurance side:1. request copies of loss reports (AKA Loss Runs) from all their insurance for at least 5 years2.

And that risk of loss of that interest has passed to the buyer.  

No "headaches" except for risk of near total loss of principle unless I put more money in...I'll take the risk of a project that I need to complete personally in exchange for a near-perfect risk/reward profile and complete understanding of the investment.

Can we takes losses from syndications (as a LP) and deduct those losses from our W2 income, Based on the fact that my spouse qualifies as a real estate professional?

If you got the property using a second home loan, you want to be careful with the amount of days that you stay in the property.If you stay in the property for more than 14 days, it may potentially be hard to utilize the losses against other forms of income.

Depending on your definition of house hack, these excess losses may be able to be carried forward as passive losses on form 8582 (not enough information to determine this part, would need additional info).I will mention as well that if you choose to switch to another accountant who more specializes in real estate, being that it's April, any good CPA will automatically want you to file an extension.

In this case, should I just accept further losses or keep the house?

The loan is a not a loss so therefore no write off. 

After this adjustment, the expenses are still greater than the rental income (it's producing a loss).What I'm unclear on is if I can apply the loss as a Passive Activity Loss deduction against my W-2 income (I'm under the MAGI limit).