Yes, you can absolutely do that. Consider this exercise the exact same thing (for income tax reporting purposes) as buying stock in a public company for X-dollars ($$$) and then seeing the share price drop to zero, after the company files for bankruptcy. In that instance you have worthless investment. So, here too, would you, if you invested in a private company that later failed. To the extent that you contributed capital, in the guise of either equity or debt (i.e., a loan), then you have a claimable loss.
Please enter this loss in TurboTax just as you would the sale or disposition of other capital assets. It does not matter that you did not receive a For 1099-B from a brokerage. Just be sure that you've kept good tax records of your loss, in case you are ever asked about it or your return is examined. A screen capture is attached to this answer to show you where you would begin to report this entry in the TurboTax program.
To find this area of the program, you would look under Federal Taxes -> Wages & Income -> Investment Income.
Alternatively, you can also do the following
1) Open your TurboTax return and search for "investment sales" in the Search field near the top of your screen
2) Simply click the "Jump To" link that should appear below.
3) From there, make your data entry, according to the information you have, answering the TurboTax questions as you go.
Thank you for asking this important question.
