Or is there federal incentive for them to hold onto them?

HAving say a 250 dollar a onth mortgage you can deduct that from your NOI to lower your taxable income.

That's reality.Which I'd say why that association of private lenders chose the term, to soften public perception.Hard money lender really isn't a proper term, some state law may use the term to describe who might be regulated or define a lending practice but it's not in federal law that I know of, private lender is.The issue of an individual who wants to be in the business using "Private Lender" is obvious, they don't want any negative connation, if any, related to Hard Money Lender and they don't want to just say Mortgage Lender as that can bring regulators snooping at the door since they are regulated.

This amount can be reduced by ordinary and necessary business expenses in order to determine your taxable income.Second, as has been pointed out, the $75K for your second flip is considered 'inventory.'

It is guaranteed by the federal housing administration.

As a rule receiving or putting money into your partnership/LLC is not a taxable event.You are taxed based on how much the company makes, regardless of how much you actually take out of the company.

Lagow’s complaint was also critical to a $1 billion settlement between the Federal Housing Administration (FHA) and Bank of America in 2012.

David Feder Yes.

Should I turn him in to the IRS, since borrowing $ and then defaulting is a taxable gain, and go for the bounty?

All of what is written above is about what happens at the federal level.