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You will, however, have a capital loss on disposition/settlement of the installment obligation.

You basis in the mortgage is 616,440 ($660,000 less the GP% of 6.6%)
You will receive the reduced amount of 600,000
For a loss of 16,440
And guess what - that's equal (with rounding) to the gain reported in the earlier year(s).

This is spelled out in IRS Pub. 537, Installment Sales.
/end quote/

Bill, Thanks for the "good news" on the reportable loss. Can you help me to find that in Pub. 537?

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