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[[I let someone borrow $2000 about a year ago and it seems at this point that the
money is unrecoverable (he can't pay it back - he's got a house, a wife, a kid
and can't seem to hold a job).]]

The problem is that IRS will expect you to put his feet to the fire before they will grant you a loss for a "bad debt". Uncle Sammy would expect you to take all reasonable efforts to collect the money...this means as far as a judgement against hime in small claims court as a lien against his house or wages.

[[ I don't expect to see this money again. Can I deduct this as a miscellaneous
deduction and how do I qualify it?]]

If you qualify, it would be a non-business bad debt on Schedule D. You can read more about the rules about bad debt losses in IRS Publication 550 at the IRS web site.

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