However, I show VERY low taxable income due to business expenses and deductions.  

@Ramon Olmos, The mortgage won't have anything to do with gain or taxability.

Forgiveness is not considered a taxable event.I have looked into physician loans.

Please note, if the bank sold it short (at a lost), they will send a 1099-Misc to the person who defaulted on the loan, as income, since that amount of the loan was in essence "forgiven" and thus reportable and taxable income. 

The good thing is that our house will be in this situation for a while so we'll be able to get our taxable assessed value down to probably 30/40k (from 210,000) over the next 5/10 years.  

Make sure you do Direct Rollover, do not take distribution as this will be considered taxable event. 

I fully fund a 401K, put what's allowed into a Keogh, and try to take the "right" amount of debt on my income properties to offset the taxable operating income.   

In general contributions into an entity do not trigger a taxable event.Doing it prior to sale leaves you open to issues of intent and holding period and the thought that you're somehow hiding gain somewhere in the entity transfer.  

I did make money but it is sheltered in my retirement account and is not taxable.

Keeping it as a rental even if it loses a little bit each month may not be the end of the world if it brings your taxable income down a little bit.