The IRS interprets the seller's owner-carry note as receiving a non-like-kind asset.  100% of the recapture depreciation allocable to the installment note will be subject to taxation in 2021.

@Michael LemMon - Each lender will have their own overlays and different interpretation of the Fannie Mae/Freddie Mac guidelines (for conventional loans). 

@Shiv DuttaInitially I interpreted your question as bringing on an equity investor.

My interpretation is that there is an Increased risk and that is why they are doing it. 

Thankfully my lender talked through this with his underwriters and figured out a way around it (it mainly has to do with how the property will be appraised, and the interpretation of 'Livability').

Because of the wording of your lease and how it can be interpreted, I would involve a lawyer as soon as possible on how to approach this. 

Correct me if I've interpreted anything wrong.

That's how I interpret the finding.

I have been in contact with the Alderwoman's office, but I am refraining from sharing any specific intentions or plans that I may have, to stay on the safe side.MY QUESTION: Is there a recommended impartial source for this sort of city zoning interpretation/information?  

Your own attorney should be able to easily interpret the terms of your Purchase and Sales and advise you on the need to clear up any title issues.