I need to move my 401K... layed off and I cannot keep the funds in this account. When I pull the money and move it to an IRA I am going to have an actual cash loss of $12,000 dollars. Can I use this loss as some kind of tax deduction on my taxes next year??
Thanks...

Nope, sorry. For two reasons:

1. When you roll the money to an IRA you're not actually making a withdrawal.

2. Even if you did make a withdrawal and it was at a loss from your initial investment you still couldn't claim a loss on your taxes, because you never paid income taxes on the portion that is "lost." For example - if you defer $10K of salary into your 401(k), and later on there is only $8K to withdraw, you would pay taxes on only $8K. So you automatically avoid taxes on the $2K that was lost.