Tax question regarding theft of service by contractor during rehab...

[Chad Clanton]

Hello BP, tax question for you. Some of you may recall a while back I had a thread and blog post regarding a rehab wherein my contractor essentially made off with a bunch of money but less than a bunch of work done (lots of lessons there, feel free to check out my blog if you're interested in a synopsis). My question is, given that that money is pretty much a loss and unrecoverable, and the work had to be done by another contractor who also had to be paid, can I chalk that money paid to the first contractor as a loss/deduction for the taxes for the year? It falls under theft of service within the state, and so would generally be considered theft in general. Any help would be much appreciated; thanks all, and invest smart!