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Sale of rental property held through partnership

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Partnership (2 partners 50%each) purchased rental property in 2010.  In 2019, the partnership sold the property for $300,000.00 to one of the partners.  K-1 is reporting section 1231 gain and unrecaptured section 1250 gain.  Settlement sheet shows corporate payout to partner purchasing the property for $150,000.00 and shows private financing for $150,000.00.  Buyer then gives partnership a promissory note for $150,000.00. The  partnership then assigns/transfers  (as documented by Recorder of Deeds paperwork) the note to the other partner.  Other partner will be receiving payments as per the mortgage amortization sheet included with his documents for the next 10 years.  Since the gain was reported by the K-1, doing an installment sale has him paying twice on the gain (on the 2019 return from the K-1 and then over the next 10 years as the installment payments are made).  Do I just report the interest he is receiving and not treat as an installment sale?  Do I show an installment sale with same price for selling and cost basis so there is no gain? The partnership is still active-they own other properties.

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Level 12

I see you are not getting any help, and I wonder if it should be restated for clarity. I can't understand, for instance, if this is what happened:

"shows corporate payout to partner purchasing the property for $150,000.00 and shows private financing for $150,000.00"

The Partnership distributed the half-owned value to that buying partner? Then, considered the unpaid half a Loan?

And: "The partnership then assigns/transfers (as documented by Recorder of Deeds paperwork) the note to the other partner."

Which places the sequence a little differently, or is that a different Note (original mortgage)?

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Level 10

Let's assume basis is zero, so 1065 has gain of 300. So half of the gain 150 is passed through to each partner as 75 each and half of the gain 150 remains on the installment plan, again half eventually passes through at 1/10th each year. 

Why does the non selling partner get the whole note and the buying partner get all the cash? That's not right.

The reality should be cash from buyer to partnership 150,  note 150 to partnership. Buyer gets 75 cash and a note for 75(which is cancelled, meaning his gain 150 is all in this year), other partner gets 75 cash and a note for 75. Buyer pays ex partner 75 over 10 years.

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Level 12

This is where I got confused on the read-through: "from buyer to partnership" because this is how it is stated: "corporate payout to partner purchasing the property" and I just can't understand why you would give any money to the buyer of the property.

I think the real issue is the Timing for the sale. The Sale is made by the partnership, not the partners? Or, there is distribution of assets and liability as the partners split (distribute) everything? At that point, the one partner is also buying the property to own 100%?

It's very confusing as written.

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"Level Up" is a gaming function, not a real life function.