Is this personal bad debt? Is it fully deductible?

Is this personal bad debt? Is it fully deductible?

On June 6, 2003, Susan Stewart, one of Bernard's stylists, left town to get away from a troublesome ex-husband. To help Susan establish a business elsewhere, Bernard loaned her $5,000. Susan signed a note dated June 4, 2003, that was payable on demand and provided for 5% interest. On October 5, 2006, Bernard learned that Susan had just been declared bankrupt and was awaiting trial on felony assault charges. Bernard has never received any interest on the loan.

I think this is personal bad debt. Is it fully deductible in 2006 though? I also think it would be a short-term capital loss, so if it is fully deductible then only $3,000 would be deducted in 2006. Is this right?

Lastly, where on the tax form is such a deduction reported?

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