based on what you provided the escrow goes away and the mortgage balance is reduce by the $20K to $160K
what we don't know is the FMV of the property and that affects the proper recording
say it's FMV is more that the adjusted mortgage balance of $160K
the sale s price $160K
cost $200K
accum depr 150K 50K
gain subject to section 1250 recapture $110K
fmv less say 110K $110K
Net value same as above 50K
gain subject to section1250 recapture $ 60K
and ordinary income from debt forgiven $ 50K normally the bank will send you a 1099C for the debt forgiven if any
