Owner financed deal, tax implications for the seller?

[Brant Richardson]

     I just found out about a friend of the family who owns a duplex that he has lost interest in.  Apparently one side has sat vacant for about a year now.  He "can't sell it because he will owe too much in taxes."  He is done with real estate so 1031 would not be an option and I'm not sure why he doesn't just have a property management company run it.  I'm pretty sure he owns it outright at this point and  I am confident he will like the idea of reliable monthly income with out the headache of being the landlord.   I have personally just about maxed out my debt to income ratio for getting traditional loans, so owner financing is very attractive to me.  I think this could make a great win-win situation depending on how he is taxed.  When I talk to him I want to be very confident in my information, although he is a friend of the family I personally don't know him.  I would like to know exactly how he will be taxed with a owner financing type deal.

     My thought is that we would have a lawyer draw up a mortgage in which I give him a 10% down payment, hopefully with a 15 year term/amortization.  Would he be taxed on the 10% down payment plus the monthly payments the first year, then just taxed on my monthly payments for the next 14 years?  Is there a better strategy to use to minimize his taxes?  Different tax rates for the principal vs. the interest?

Thank you in advance for your time spent reading this and responding, 

                                                                                                                 Brant