Is there a tax deduction for defaulted loan interest not-paid?
Moving this post to tax forum... Think answer is no, can't claim unpaid interest on 1099-C, but @paresh patel brings up good point about what hte Box 3 pertains to. Anyone know what the purpose of this is?
But if Interest can't be included in the 1099-C, why is there a Box 3 for Discharged Interest? https://www.irs.gov/pub/irs-pdf/f1099c.pdf -
Also why does it say this in the 1099-c Instructions form: "A debt is any amount owed to you, including stated principal, stated interest, fees, penalties, administrative costs, and fines. The amount of debt canceled may be all or only part of the total amount owed." and "Interest. You are not required to report interest. However, if you choose to report interest as part of the canceled debt in box 2, you must show the interest separately in box 3." ?
I believe the borrower or debtor would indeed have to pay taxes on the income amount noted in box 2 on the 1099-C. In any event, that's the borrowers problem - we have enough to worry about