Reporting sale of owner finance note at a discount

[pffh77b1]

I sold a rental property in 2018 with an owner finance note of $200K.  In 2021 I sold the note to a broker at a discount for $180K.  How to I account for the $20k loss when I finalize the 2018 rental property sale and report the last payment for the sale has been made?

[Mike9241]

based on IRS PUB 537 the part about the disposition of an installment sale obligation

https://www.irs.gov/pub/irs-pdf/p537.pdf 

multiply the remaining (unpaid balance) by your gross profit percentage.

subtract this amount from the unpaid balance.

you now have the basis in the note.

the $180K less your basis is capital gain or ordinary loss because the sale involved section 1231 property.

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