A partnership with two brother-partners obtained a bank loan to purchase a tractor on 04/06/05 for $37,000. A Section 179 deduction for $37,000 was taken in tax year 2005. In 2007, it was decided that the tractor should be converted to personal use by one brother-partner. The original tractor was traded-in to John Deere on another tractor and the remaining loan balance was paid-off by John Deere while setting up the new personal loan for the brother-partner.

While no money changed hands directly, the partnership was relieved of the remaining loan liability of: $31,115 on 10/24/07.

What is the correct way to clear the Partnership books of the tractor: (below is what I have come up with so far)
Journal off the Long Term Loan of $31,115
Debit - N/P - Tractor
Credit - ____________________
Reduce the Depreciable Assets and related Accumulated Depreciation ~ $37,000
Debit - Accumulated Depreciation
Credit - Machinery & Equipment