Yes - LLC would be disregarded entity for tax purposes and all income and expenses would be passed through to members.
Rental activities in which you materially participated during the year are not passive activities if, for that year, you were a real estate professional. Losses from these activities are not limited by the passive activity rules.
For this purpose, each interest you have in a rental real estate activity is a separate activity, unless you choose to treat all interests in rental real estate activities as one activity. If you were a real estate professional for 2007, complete line 43 of Schedule E (Form 1040).
As that is a rental property - you generally should use schedule E and not schedule C.
If a married couple who file a joint tax return elect to conduct their business activities as a qualified joint venture, (a trade or business entity in which the husband and wife materially participate in such venture), the spouses must divide the items of income, gain, loss, deduction, credit and expenses in accordance with their respective interests in such venture.
Husband-wife partnership. If spouses carry on a business together and share in the profits and losses, they may be partners whether or not they have a formal partnership agreement. If so, they should report income or loss from the business on Form 1065. Each spouse should carry his or her share of the partnership income or loss from Schedule K-1 (Form 1065) to their joint or separate Form(s) 1040.