You should allocate the depreciation recapture the same way you reported the income and expenses for the rental property? Did you report on a Form 1065 Partnership return. If so, you file Form 3115 with the 1065 and the depreciation recapture is allocated via the K-1s. If each of you reported a third of the expenses on their personal tax return, each of you will need to report the sale of a third of the property, and would file their own Form 3115 if necessary. You would each have your own depreciation recapture as part of reporting the sale.
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