Given the fact that if  there is a gain a future year the prior year loss can offset it, it seems that one would want to file the loss so they can offset that gain.

Like others have said, you cannot claim the tax losses until the funds are sold and "realized". 

However, understanding the passive activity loss limitations is crucial before making this investment.

I can imagine this is a challenging decision to make.My thoughts:When hope is a key component of the plan of action, it is time to cut losses.

Some of the most successful investors got creative to land their first deal—and that’s exactly what I’m looking to learn from.If you started with limited capital, what strategies helped you land your first deal?

@John Zhang If your wife qualifies for Real Estate Professional Status (REPS) and materially participates in managing rental properties, there is no limit on the amount of rental losses, including depreciation, that can offset your W-2 income.

If you spend the entire $300k restoring the property, then here is the end result:- deductible casualty loss of $50k- no current tax- the restored property has $0 basis and cannot be depreciated- when it is later sold, the entire sale price is taxableMechanics and reporting are tricky, and I would not recommend to DIY it, especially since my scenario is over-simplified, and your real scenario is likely to involve more gotchas.Thanks so much. 

Also, here's a great article that describes the REPS status:https://www.aicpa-cima.com/resources/article/tax-rules-for-r...And another for the passive activity loss limitation that other mentioned:https://www.irs.gov/publications/p925

A partnership vs. disregarded LLC warrants consideration- you face different reporting requirements, limitations, etc. 

(check page 7 of this IRS Pub)Something that's non-passive and you materially participate means you can deduct those losses up to the excess business loss limit.