Principal or Interest

[neallove]

Note receivable for 120,000 interest only for first three years which ended 2-1-10 secured by
land and building

Buyer continues to pay interest only and ignores client request for payment of note

can payments in 2011 be considered principal with the idea that the note will never be paid
and anything received is to applied to the principal.

The ultimate foreclosure will be a long drawn out affair and the amount to be received cannot be determined.

[RitaB]

Imputed Interest

can payments in 2011 be considered principal with the idea that the note will never be paid
and anything received is to applied to the principal.

I believe you are going to have to say at least some of the payment is interest. You can get to the rate tables from here:

http://www.irs.gov/taxtopics/tc705.html

[taxea]

how does the contract read? What does the payor say it was intended as? Is there any kind of installment agreement or loan agreement?