I invested 25k in my friends S-corp 4 yrs back. If this investment had turned into a profit, I would have gotten a 1099 from my friends comp...

Question

I invested 25k in my friends S-corp 4 yrs back. If this investment had turned into a profit, I would have gotten a 1099 from my friends company Plus the principle. However, he got embezzled by someone else and lost all my investment. He sued that person, won the law suit, but I doubt we will be able to recover any money.

Question: Can I show 25k as a business loss in my Tax return or should it be theft loss ?

Answer

" I doubt we will be able to recover any money." - Your doubt in collecting that debt doesn't qualify as a business loss.

No to theft loss. Also regarding business loss, are you still a shareholder/partner in the S-corp? It matters.