It was a roll-over to an investment company that used the money to fund the business. Lost about $200,000. Can't seem to get proper reporting out of investment company or failed business.
Since you rolled the funds over from the 401(k) into a self-directed IRA the loss is not currently deductible.
In order for you to have a deductible investment loss you would have had to pay taxes on the withdrawal from the 401(k) at the time of the investment into the business or you would need to have a basis in the 401(k) from after tax contributions and have liquidated all of your traditional IRA accounts in the same year.
You don't deduct the loss. The whole point of these types of retirement accounts is that you don't pay taxes on the contributions, only the withdrawals. Your tax "reduction" is that fact that, since you have less to withdraw, you pay less tax when you retire.
In fancier language, if you used tax-free money to invest in this business (probably by a rollover self-directed IRA, as suggested), then your basis is zero. If the investment is worth zero, then your loss is zero minus zero = zero. If your investment is worth $10, then you have a $10 gain, not a $199,990 loss. That gain would be taxed when and if you withdraw it from the IRA.
If you withdrew money from the 401k and paid income tax on it, then you have a basis in the business like any other regular (not tax-advantaged) investment.