What are the tax implications for the seller in a seller financed deal?

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Hey All,

Did some research in the forums but could not find an exact answer to this one, hoping someone out there can help: What are the tax implications for the seller who owns a SFR outright and seller finances?

  Background: we are moving to a new area and heard about a house that the owner owns outright who wants to rent when he and his wife move to a retirement community because he does not want the tax burden of a windfall.  But he also does not want to be hassled with the house so plans on using a property manager.  I asked if he would be interested in seller financing, which seems a win-win for both of us, but neither of us knows what the tax implications would be.  He has probably owned the house for a long time and because of the location and current value, would have significant appreciation (well over $1M).

  I appreciate any info.  Thanks,

Vincent