tax consequences of "short sale" on private note?

[Bill McCoy]

I held a private deed of trust (5 years, balloon payment) in a friendly transaction but it was all properly recorded, etc.. I agreed to effectively a short sale: mortgagee sold property and I received all proceeds, which did not quite cover the principal amount and thus didn't cover any of the accumulated interest. There was no foreclosure, but I was paid directly from escrow.My question is how to report this transaction on my taxes - just now realizing this might have tipped me towards using a tax accountant this year but a bit late now! I think I at least have a small capital loss on the deficit to principal but perhaps a larger capital loss if I can write off the agreed interest income that I didn't receive?? 

Hoping someone on this forum can provide some pointers. Thanks in advance.