Whether someone is actively and materially participating, real estate, by definition, is a passive activity. If this client has an income over $125K and the client is NOT a real estate professional, then the loss is not allowed in the current period due to Passive Activity limitation.
What if they are a real estate professional and their income is over $125K?
You have to find someplace in your program to indicate this situation applies.
Under this scenario, the loss should be allowed.