I was wondering if you could somehow claim a loss on your taxes if you lose a portion of your capital contribution.
e.g. somebody paid up $25,000 and loses $5,000 of it.
Can the 5,000 be deducted as a loss somehow? Also is this treated different because it is after Tax money.
Any help would ne appreciated
USA Federal tax law allows a deduction for many items such as you partially described. Depending on the facts and circumstances the party who saw the value of his investment/business decline may get an immediate tax deduction or tax credit, or a deferred tax deduction, or possibly no deduction at all... it all depends on the situation.
For many stories like the one you describe, there is a Schedule K-1 issued that helps identify the federal tax implications for you.