Question about loss from hedge fund investment

[pearlw1]

What is the name of your state? California.

I lost almost $200,000 in a hedge fund investment in 2004, an investment I clearly should not have been in. My question is regarding showing the loss on my next income tax statement. I continue to periodically receive statements from the Custodian showing on one side of the statement the amount of cash I initially invested, and on the other side of the statement, zero, because the hedge fund I invested in, no longer responds to calls or advises of the value of the investment. [I have already sued, and have had to discontinue the case due to various reasons and have accepted the loss.] I spoke with a representative of the Custodian who said that the Custodian would continue to send out statements until such time as they might determine it can close the account.

Will I have a problem with the IRS if I add the loss on my next IRS income tax statement?

Thank you in advance for your response to my question.What is the name of your state?

[efflandt]

Is this personal or business? If it is a personal investment loss (schedule D), you can only deduct losses up to $3000 more than your capital gains, per year. The rest of the loss carries forward to next year. So depending upon how your other investments are doing, you may be able to offset some gains for awhile.

This is NOT something you can deduct as a casualty loss.