@NCperson wrote:
@Opus 17 - but in this case he held the loan; he wasn't the debtor. So if the debtor paid EXACTLY the outstanding amount , I agree, there is no tax consequence. But if the debtor paid the mortgage off at a premium (income) or discount (loss), there is a capital gain / loss situation.
Yes I missed the this was the lender. The lender should have been reporting income from an installment sale, right? In which case they need to close that out? Or, if they were reporting the interest as income and not the principle (which should have been the case) now they report less interest since they received less. The principle is not reported as income since it should have been dealt with as a capital gain in the year the property sold.
