An investment of $2000 into a Roth last year and lost $500. I recharacterized it into a Traditional IRA. Should I claim a $2000 or $1500 as the income reduction? If I allowed only a $1500 reduction may I calim the $500 loss some other way?

You have no deductible loss. Sorry.

Barry,
Can't Jim recharacterize his Roth contribution as traditional IRA and deduct the original $2000?

I thought the fact that his earnings were negative would not affect the contribution amount, i.e. that the full $2000 would be considered as having been contributed to the tradional IRA.

Correct, I missed that part. The deduction, assuming the IRA is deductible, is the full $2,000.