Real Estate Law
Have Real Estate Law Questions? Ask a Real Estate Lawyer.
It could be a taxable capital gain; however, the IRS may call it ordinary income as debt forgiveness. IOW, you have borrowed out the equity and the lender is accepting the property in full satisfaction of the debt. It is not a sale per se and is more likely to be viewed as debt forgiveness. You will have to have that narrow distinction researched by a CPA.
I hope that you will enter a positive rating for my assistance here by clicking on 3, 4, or 5. There is no additional cost to you. Thanks again for using JUST ANSWER.