I am holding a private mortgage from the sale of some land. The mortgagor has stopped making payments. They have agreed to give back the property if I forgive the balance of the debt plus pay them $1k. Do I have to pay taxes on the unpaid balance of the loan.

Run this by your accountant, but I don't see why you would have to. You didn't receive that amount.

Be careful about a deed in lieu of foreclosure. If someone acquired an interest in the property subsequent to your mortgage (such as a lien, etc.), you could wind up junior to that interest and would have to pay it off to regain clear title.

Why would you want to do this rather than foreclose? It may be cheaper for you, $1K vs lawyer fees for the foreclosure. But if you go for the foreclosure they will still owe the balance.

If you do this, make sure you do a title search and require a warranty deed.