Is it completely worthless- You can take a short term capital loss for non business related bad debts on Sch D. It can be taken only in the year the debt is totally worthless. From the facts, you provided the loan was given in Oct 2007. SO it will be too early to decide that the loan is worthless unless you have concrete evidence/explanation to this effect.
Let me know if you have any question. Bonus and Feedback will be highly appreciated!!!
Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.