Keep the deal alive!: How to help seller avoid capital gains

[Neal Collins]

We are looking to purchase a duplex from an absentee owner who acquired the place 13 years ago for $175,000. He is willing to sell it now for $250,000, but he has a $150,000 mortgage on the place. We almost lost the deal after he spoke with his accountant who told him he would owe ~$50,000 worth of taxes from capital gains.

We are trying to determine the best ways to keep the deal alive and would love some input from the BP community. Here are some ideas that I have (I didn't include a lease option in here here because I want to be the deed holder to be able to do the rehab and potentially resell; Also, a 1031 exchange is out the window because he doesn't want to own property anymore):

1) Can we assume the $150,000 mortgage and then put the remaining $100,000 in a structured sale? Are banks even allowing this still?

2) Wrap mortgage for $250,000 with a term of 5 years with no interest, just equal lump sums of $20,000 which is then used to pay off the first mortgage. With this, though, I'm worried that the bank will call the note, or the seller will find this option too risky ("Just don't tell your bank that you sold the place and you'll be fine"....yeah, right).

3) Structured sale with a 5 year term, with a $150,000 for the first year to pay off the mortgage, and then equal payments after that?

His idea was to bump the purchase price up to $300,000 to cover the capital gains and still give him his ideal margin. That idea obviously did not fly for multiple reasons.

Feedback and any more ideas would be great! Thanks in advance.