Hello, I've searched a few of the threads in here, but I haven't quite found anything to answer my question fully.  So, I'd like to propose a scenario here:

Property purchased for $1,000,000.  

$50,000 in depreciation taken over the course of the ownership.

$250,000 in capital expenses put into the building.

Sale price of $1,150,000, on a seller-financed note.  5% down, 5% interest rate over 10 years (10 year amortization, no balloon).

The seller finances $1,092,500 (95% of purchase price).

My questions are:

1)  Since the sale price (plus depreciation recapture) is less than the purchase price + capital improvements, it is treated as a capital loss, correct?

2)  The interest earned on the loan - is that treated as a capital gain, or is that treated as interest income?

3)  Is the first $50,000 in interest earned considered tax-free?  The sale price is $1,200,000 ($1.15M + $50k depreciation recapture), but the purchase price is $1m + $250k in cap expenses.  Therefore, can you count the interest earned against that $50k capital loss?

4)  Can you take the entire $50k capital loss in the year you sell, or does it have to be spread out as you receive the money from the seller note?

Thanks in advance.

One last thing - we are moving from San Francisco to Portland, OR.  We are not 100% happy with our CPA here, at least not happy enough with them to keep after we move.  Any recommendations for a good CPA in Portland?  We have 35 units now, after selling a bunch, but are actively buying more.

Thanks again everyone!

Nik