The most likely scenario is that his renters will eventually do something that costs him a significant loss, despite cutting them a major break for so long. 

Problem is only "RE pros" get to do it.There are 3 income classifications in the US - Active, Portfolio, and PassiveActive income is income derived from your job, or normal trade or business.Portfolio income is derived from bank instruments - stocks, bonds, etc.Passive income is income earned from investments.Active losses can wipe out both passive and portfolio income, but it doesn't work the other way around.Portfolio (capital) losses are limited to $3,000 annually.Passive losses can only be offset by passive gains.Real estate rental income by its nature is deemed passive per IRC Sec 469One way to get around it is to become a pro - spend more than 750 hours or 1/2 your time in real estate.But most folks aren't real estate pros.

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

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.  

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

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

@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.

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.