A 1099-R is issued for funds out. Not for how they got treated afterwards.

A 5498 is issued for funds in. Not for where they came from.

"I had told him before to take out a loan for $50,000. with the IRA as collateral but he didn't"

Why would you recommend this? I'm not sure this is pertinent, anyway

The distribution just is what it is. Code 1 means the issuer gave money with nothing specific known or certified about that distribution. It's up to the tax payer to have done something that creates any exception. And your client did that thing, if you are treating this as Rollover. That means you will enter the 1099-R as you see it, then you will identify that $50,000 of this Gross amount was rolled over.

And yes, if there is Basis, then the total of the IRA accounts are used to figure the  taxable pro rata amount against that Basis. Not just in that one account, though. You need to read the rollover regulations, enter the data, and see the computation.