Your partner? Did the two of you establish a partnership for this rental? It sounds like you didn't sell half the rental to the friend but that you contributed the whole rental property to a partnership and the friend contributed half the value of the property in cash. If that's what happened you'll be filing a partnership return but you don't have to report a sale because you received cash in exchange for a partnership interest, which is still an ongoing enterprise. You need legal and professional tax advice no matter what.
