So would I be right in suggesting if you lost money with MTGOX it is tax deductable as a loss? Surely it has to work both ways?
Yes, I would think so. The difference between your cost basis and the current value (zero for those lost coins - unless the "Magical MtCoin Coin Finding Fairies" (TM) keep finding them, that is...) would be considered a Capital Loss from the way I understand it.