Jake loaned his cousin, Arnold, $10,000 in March 2014 to open a cybercafe in Santa Barbara. Arnold signed a loan agreement to pay Jake 7% interest annually, with the principal due in 2017. Jake received his 2014 interest payment but did not receive any interest payment in 2015. In March 2016, Jake's father informs him that his cousin has filed for bankruptcy.
Identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue you identify.