It may be possible to claim a dependency exemption for a relative living in Mexico. While the niece cannot be a qualifying child because she does not live with you, the niece may be a qualifying relative. As long as she cannot be claimed as someone else’s dependent, then you can claim a dependency exemption (assuming all other dependency exemption requirements are met).
Rules that limit the deduction of losses from passive activities to income from other passive activities. Passive activities include investment rental operations or businesses in which you do not materially participate.