USDA short sale deal falling apart, NEED HELP !?!?? SOS

[Kris Haskins]

Hey BP Fam, I have an approved short sale with USDA, the letter states they will accept my offer and it has the net amount on the letter.  The seller is worried the IRS will count the difference between the sales price($80k) and the total loan amount($120k) as ordinary income (approx $40k) and is ready to walk from the deal.  The seller's attorney is advising NOT to sell the house and let it go to foreclosure.  Is there any way I can save this deal, SOS!?!????