Second, the investment may have been made anticipating a chance of failure; for example an investment may correctly analyze that it has a 50% chance of a 25% ROI, a 35% chance of a 50% ROI, and a 15% chance of a 50% loss.  

Not only that, they sued and won on a theoretical loss not even a factual one as the plaintiffs sued stating IF they (a) they think the result would have been (b). 

Uses the syndication depreciation losses to help offset active incomeI did read your post mentioned above @Michael Plaks which is very informative.

Bitcoin hasn't completely become uncorrelated, I think when people are hedging risks, they will cut whatever losses, wherever they can. 

@Rud Sev Your Section 1231 losses from the sale of rental properties were likely correctly reported on Form 4797 (Part I) as ordinary losses, allowing them to offset all types of income.

We’re at a loss on how to resolve this and make our home livable again.

Once you have REPS the distinction between passive income (or losses) and active income (W2) disappears and all those tax losses you have been banking can be applied to the W2.Good luck

The income/loss flows to your personal tax return. 

Loss of income is another coverage that you will probably want to cover any period of time you can’t rent out the apartment due to a covered loss.

So, if the tenant did that and got fired, you are the landlord would compensate them for the loss of their job?