I converted my partnership to a S Corporation with an effective date of Jan 1 so I am preparing the final return for the partnership and will begin filing the initial return for the S Corp in the next tax year. I checked the box in TT to indicate that this is the final year, but I am trying to present that essentially all of the assets and liabilities were simply transferred to the new entity upon conversion (ownership has not changed still just 2 of us with 50% interest each). On the Form 1065 - I indicated that each asset was sold for $0 since it was a transfer, which I hope is correct? (I'll be carrying forward the NBV of these assets as the beginning asset cost in the new entity). However, there is one asset considered "listed" property (it's a cargo van for deliveries) and sec 179 depreciation was taken on it in 2021. There is also a piece of equipment that previously had sec 179 depreciation taken but it's not considered "listed" since it's unique to business operations only and could never be used for a combination of business and personal purposes. As a result, I don't think that I need to include this in the depreciation recapture consideration piece on my personal return, correct?
To that point, as I work on my personal taxes, under the K-1 information, there is a component called section 179 recapture and I think I need to include the van asset here since the IRS considers it "listed"? The wording is confusing in TT though because it mentions business use falling below 50% but it's really a situation where the asset was transferred to the new entity. I think that the TT program is adding back the sec 179 expense that was previously taken and then taking me on this, but I just want to make sure I'm not being double taxed in the future on this since the asset is still 50% mine (through PTE interest as a S Corp shareholder). I guess I'm just confused on how to properly account for the termination of the partnership at the end of the tax year to ensure that I'm not paying unnecessary taxes on this disposition as I'll be re-assuming 50% of all assets and liabilities under the S Corp entity. Thank you in advance for any insight you might have.
