The three-family home which was used as a primary residence and rental was for foreclosed on in 2012. I purchased this home with two other investors in 2004. We occupied two floors and rented the third for a few years. The relationship went bad and they bought me out in 2007 after I signed a Quit Claim Deed. They were to remove me from the mortgage by refinancing per the contract we all signed, but they waited too long and the housing market crashed. The mortgage was paid on-time until mid-2011. I hadn't claimed this house on my taxes since 2007. My lawyer was able to negotiate a settlement with the bank for legal fees and got them to agree not to send me a 1099-C. The settlement of $11K was reported on a 1099-MISC income form, the entire payment went to the law firm.

Can I claim the 1099-MISC as a bad business investment or loss?