I was member of an LLC and in 2013 we dissolved the partnership. As part of the distributions, I received my portion of a note receivable worth about $100,000. We never owned the property but were hard money lenders. Then in 2014 the person was not paying their note, so I was was going to start the foreclosure process, but instead of dealing with all that, I took a buyout of $75,000 for my portion of the note that was worth $100,000.

How do I record the $25,000, as a capital loss or ordinary loss?

when a partnership dissolves, the partners record losses according to personal interest percentages in the partnership; partnerships are a type of business structure. A partner who sells or exchanges a partnership interest must recognize gain or loss. Because a partnership interest is considered a capital asset, such gain or loss is considered as capital gain or loss from the sale or exchange of a capital asset, except as otherwise provided in IRC section 751 relating generally to the presence of assets within the partnership that would generate ordinary income if sold. The law provides that the consideration received by a selling partner in exchange for all or part of his or her interest in the unrealized receivables or inventory items of the partnership shall be treated as a sale of an ordinary income producing asset.

So do I treat as a capital loss or ordinary loss?

So do I record the loss a a capital loss or ordinary loss?