The losses are probably valid; however, they are subject to limitations. $100 per 'incident' is deducted off the top, so you are only eligible for $1,800 after that. Then, it is only the amount by which you exceed 10% of AGI (Adjusted Gross Income, the bottom line on page 1 of your 1040). So... that means if your AGI is over 18k in 2006 you will not receive any benefit from the loss. (To go one step further, this amount is only deductible if you itemize as it is included on Schedule A, not page 1. If the property was insured, there are even more rules.)
Sorry, just the messenger. It's very rare that anyone can take this type of deduction b/c of the thresholds.
Let me know if you have any questions.
Laurie (aka TaxGeek)