a loan defaults, a 1099-R is issued on the entire remaining balance as taxable
in the current year. In addition, the loan will remain as an outstanding
defaulted loan on the account and continue to accrue interest until the loan
is paid off or the account is closed. The principal and the accrued interest
from the last payment received until the default date are taxable.
Nothing contained herein is intended to be, nor should it be construed as tax or legal advice. If you have a tax question or legal question, please consult your tax professional or attorney.