It depends, If the rental property has been transferred to name of the buyer, and you are still in the business of commercial real estate, then you must complete and file Form 1098. If you are no longer in the business of commercial real estate, then a form is not required to be filed.
- Who Must File File this form if you are engaged in a trade or business and, in the course of such trade or business, you receive from an individual $600 or more of mortgage interest (or $600 or more of MIP, if section 163(h)(3)(E) applies for the reporting year) on any one mortgage during the calendar year.
Yes, the owner can deduct the interest payment as mortgage interest if the property is in the name of the buyer and is security for the loan should default occur.
You should have an amortization schedule for your records so that both you and the buyer agree on the amount of interest paid/received.
You would report the interest income under Interest and Dividends then selecting Interest from Seller-Financed Loans
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