I see so much conflicting and incorrect information in this thread, I don't know where to begin.
So you need to sell the old asset at a loss (received $0 in the sale)
No so.
Insurance covered all but $100k of the repair costs.
Your sales price of the old asset is whatever the insurance payout was. On top of that, you did not sell the land, and the value of the land did not change. Only the structure was sold. Add to that, one partner paid $100,000 to cover the costs of rebuilding that was not covered by insurance.
Now I could keep going and dig a really deep hole here, that even I can't get out of. I would highly recommend that both of you seek professional help. If your state also taxes personal income then professional help is even more highly recommended here. The cost of professional help will be a pittance, when compared to the quagmire you can get yourselves into with the IRS as well as the state, if not done right.
I also recommend that going forward, you establish a partnership and starting reporting this on the 1065 Multi-member LLC/Partnership return. Especially since ownership share is not split evenly now between the partners.
