With the economic climate, I placed $20,000 in a CD that I pledged as collateral for a bank loan for my brother and his partner's business. This was 3 years ago. The businees continued to suffer and they were unable to keep up the loan payments. 2 months ago the bank took about $15,000 of the CD to cover the loan. Can I show this as a loss on my taxes? If so what is the proper way to do so? This assumes my brother and partner do not repay me any of the money, which I doubt will happen anytime in the next several years, if at all.Please no comments that one should not loan to friends or family. When I did this I knew that loss of the money was a strong possiblity so considered it gone from the start and then if it didn't happen I was ahead.
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