My client owns 50% of a non-residential rental building with a tax assessed value of $695,650 and depreciated using the SL method for 39 years.  The land value was not determined and was included in the depreciation.

In November 2019, the 50% ownership was sold for $325,000 with a Letter of Intent to purchase in 4 payments and to go to settlement within 45 business days of the signing of the Letter of Intent.  In 2019, three payment totaling $100,000 were made.  No payments were made in 2020. In 2021, 2 payments totaling $8,000 were made.

Questions Do I go back and amend the 2016-2019 returns to recalculate the correct depreciation minus the land value?  Since the installment sale has not been completed, will the carryover passive losses will continue until the sale is completed?  What happens if the final sale does not go through?

Thanks for any solutions.  I know this is complicated.