Capital Gains Tax Exposure and Recapture Exposure.
Provided that you have owned the duplex for more than two years and have not lived in either side of it, you will have exposure from two fronts.
1. Basis - this is the price of the property minus the depreciation plus any improvements to the property - this will be recaptured at 25% capital gains tax
2. Capital Gains - this is the amount of difference between purchase price plus improvements and the sales price to your daughter. This will be taxed at a long term capital gain of 15%
Since you are selling on a contract, there will be a ratio of Interest, and debt payoff - from a tax perspective, interest from the contract will be income to you, and the loan paydown will have to be calculated as ratio of how much is capital gain and how much is depreciation recapture.
I would definately seek some tax advice from a CPA or enrolled agent to figure this out before you structure your deal. Some CPA's would tell you that you have to pay all your tax upfront and others will treat this as an installment sale - which is where you would pay your tax as you receive your money.
You may be better off depending on what tax bracket you are in to sell it to them with a regular loan, carrying back a 2nd if necessary and trading into a Tenant In Common transaction if you are wanting the income.
There are many different paths you can go down with this. I would recommend John Brahms CPA - email@example.com
Tell him Rich the mortgage guy sent you! :)
If you don't need the cash out of the property have you considered carrying the paper? An installment sale can help to delay the payment of taxes on the property sale. And it will eliminate your daughter's need to get a new loan. Good luck.