Is there a tax deduction for loan default interest not-paid?

[Paresh Patel]

Hello.  I would like to pose a question relating to the tax treatment of Loans made though any of the leading Real Estate Crowdfunding Portals that go into Default.

Many of the CF sites may reasonably be expected to eventually experience defaults from their borrowers.

Therefore, consider a scenario such as this on any of the real-estate debt crowdfunding sites:

• - The borrower pays regularly for 9 months, but then defaults.
• - Default interest rate of, say, 20% kicks in thereafter
• - Loan remains unpaid for the following, say, 18 months before the crowdfunding site is finally is able to foreclose and sell the property but the Property can only be sold with enough cushion to repay investors' principal and only a little extra interest, but not all. (and certainly not all the extra interest that accrued at the higher default interest rate. )

Question : Do we, as investors, then get to claim a tax deduction or write-off for all the interest - including the default interest - that was not paid? (Is there a tax form issued for such?)