I don't know if this is the right category, but here goes:

My brother and I have an inherited piece of property. My father sold the Note and became the "bank" back in 2012 to generate income to pay for medical expenses. Currently, the person who pays us a monthly check stopped paying for January, and was late on his payments twice in 2018, and did not pay the penalty late fee. In addition, this person also changed the name on the note to a different company back in 2016, without notifying us. For these reasons, my brother and I have decided to initiate a non-judicial foreclosure, which requires them to pay the note in full, which is about $1 million.

HOWEVER, we will be taxed on this $1 million at 34%, which seems like a lot to have to pay in taxes! We are not eligible for a 1035 exchange because my father did not initiate that at the sale in 2012.

The other option we have is to negotiate with the owner and allow them one more chance to redeem themselves by paying on time, or setting up direct depost, etc. According to the schedule, we would receive monthly payments from them for 18 more years until the mortgage is paid off.

My question is - which is a better financial decision - from a pure monetary standpoint? Are we paying more (or less?) in taxes by taking the lump sum vs. paying taxes on the annual interest, or is it a wash? Which is the more financially advantageous decision, and is there a big or small difference?

Thanks in advance for your help...