" I'd like to do our own taxes and hoping it's fairly straightforward".
No, it's complicated, particularly with the additional details. More particularly. one partner is going to file Schedule C and the others Schedule D or Schedule E.
Yes, you can recognize the loss, in the year of sale. The purchase and construction costs are "cost of goods sold" (COGS) for the business and the cost basis for the investor.
Carrying costs, in the year sold, are generally added to the cost basis/COGS. But carrying cost in a prior year may need to be treated differently by the business or investor.
You probably need professional tax help, especially for the 1065.
