Capital gains if no principal is paid?

[Tom Walrod]

We want to do right by our property manager and ourselves. We own a multi free and clear and want to get it into his hands, but also want some income till we die. If we sold the multi to him for no money down and 5% interest only payments, with the principal due if or when he sells the property, and the contract extinguished on the death of the last person in this couple would we owe the tax man anything other than the tax on the interest we received? The buyer could make principal payments if he chose, and we would owe tax on that, but he would not be obligated to make such payment unless he sold the property - and of course we would owe capital gains if we were paid off. But if we don't get any principal payments wouldn't we only owe tax on the interest we received? Can a contract for sale be written that extinguishes a debt to a seller at the seller's demise?

We want him to have control and ownership of the property; he has virtually no down payment, paying us 5% replaces much of our lost rental income but leaves him a fair amount and the ability to benefit from rent increase and appreciation. If this is a horrible idea can anyone suggest something better? We are divesting of 33 units, the multi we want him to have is 8 units. Just read about something called a Collateralized Installment Sale Agreement or C453 installment sale, which puts off capital gains taxes for 30 years - past the time I plan to be here.