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Generally - yes - the loss may be used to offset your taxable income,
however - there might be some limitations depending on the type of the loss.
What type of loss did you have?
It is still not clear what type of loss you have...
Did you sell real estate for less than a basis - and have a capital loss?
Or you are in the real estate business and have a business loss?
Please clarify and provide more information about your situation.
As an investor and a shareholder of the construction company - you should receive the schedule K-1 that identifies the type of loss.
Please specify - if the construction company organized as S-corporation , C-corporation or a partnership?
In which box of the schedule K-1 the loss is reported?
I am still unclear on the type of loss.
So - you had a loss from S-corporation reported to you on the schedule K-1 - http://www.irs.gov/pub/irs-pdf/f1120ssk.pdf - box 1 as Ordinary business loss.
You may not carry such loss backward and apply to your 2005 income.
You can only deduct an S corporation loss to the extent of basis you have in the S-corporation, or in direct loans to the S-corporation. The loss above that limit is not deductible to you.
As you are an investor and not an active participant in S-corporation activities - the loss is deductible only to the extent of your other passive activity income and is subject of "passive loss" limitations.
Let me know if you need any help.