There are too many questions and a forum such as this is not conducive to providing too much direction. This is best handled with a one on one with a tax professional.
- Are the parties related?
- Did you properly complete form 6252 in the year of the sale?
- Are you forgiving the entire loan balance or just part of it?
- Did you (and the buyer) complete form 8594?
- Based on the limited facts, it appears that you have to redo your form 6252 and form 8594 since there is a change in facts; adjustment in the purchase price.
- I assume there was also a purchase price agreement and this should be amended as well (you should use an attorney for this).
A tax professional (and attorney) should be able to help you navigate this matter.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
