"He did receive payment for his partnership interest and he did not pay off the debt related to the partnership interest."

Okay, then 🙂

Assuming this was an unsecured debt, then? Or, he renegotiated to keep the debt as personal, since he "cashed out" but didn't pay off this debt? Or, the debt is now secured by something other than the original partnership position?

"Are you saying I should trace how he used the money received on the sale to determine how the interest is deducted?"

Well, if he lived on the purchase funds or went on vacation using them, there isn't any reason to trace anything, and there is no longer business interest and there sure isn't investment interest.

It does seem you have a bit more research to do with the person and then for the person.