Can unpaid interest be deemed to be a loss?

Some years ago taxpayer, under a formal agreement, lent $200k at 5%int. to borrower to buy land. Land was used by the borrower as security.  Borrower defaulted on loan agreement and property is now to be sold by the lender under a power of sale.  No interest was ever paid and therefore none was ever reported as income. Can this perceived loss of interest be deemed to be an investment loss or should it just be recorded as a bad experience?

1) In the event the land is sold at an amount higher than 200k can the "lost" interest be added to the cost base to reduce the amount of capital gain?                                                             2) should it be sold at a loss would this then be treated as a capital loss to be offset by future capital gains or is it a 100% investment loss?

I am open to any suggestions.

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