Note Investor Taxes / CPA - Non-performing specifically..

[Daniel E.]

I imagine there are some very specific tax strategies for non-performing note investors. 

For example, if you purchase a $500k legal balance (unpaid principal + accrued interest/fees) for $200k, then rehab and sell the property for $300k, can you write off the uncollected $200k (the $500k - $300k difference i.e. not pay taxes on your profits, as on paper as the lender, it is a "loss")?

What strategies exist? Thank you in advance!