Partnership Property Transferred to Partner but Asset Remained on Books - How Should 2024 Form 1065 Be Reported?

I'm preparing a 2024 Form 1065 and have inherited a file with a fact pattern I'm unsure how to report.

Facts:

• A partnership owned 100% of a single-member LLC.
• The single-member LLC owned a residential property.
• In January 2022, a warranty deed transferred legal title from the LLC to one of the partners individually.
• According to the partner, the transfer was done solely so he could qualify for the Florida homestead exemption based on his attorney's advice.
• The property was owned free and clear.
• The partner later sold the property personally in February 2024.
• The LLC was not dissolved until September 2024.

The issue is that the prior preparer did not appear to change the accounting after the deed:

• The single-member LLC continued to carry the real estate and depreciate it on its books through 2022.
• The partnership continued to carry its investment in the single-member LLC on its balance sheet through 2023.
• No apparent distribution or other transaction was recorded to remove the investment.

I'm now preparing the 2024 partnership return and am trying to determine the correct federal tax treatment.

My questions are:

1. Should the January 2022 transfer have been treated as a distribution of partnership property or another type of transaction?
2. Since the prior returns continued carrying the investment after the deed, should the correction be made on the 2024 return or by amending an earlier year?
3. If you inherited this file in ProConnect, how would you approach reporting it?

I'm looking for guidance on the federal partnership tax treatment, not Florida homestead law.

Thank you in advance for any insight.