Schedule K1 - Termination of a partnership

[Masamenos]

My wife and her business partner terminated their business in 2025.  There was no sale, just a termination and distribution of the capital accounts.  Their CPA prepared the form 1065 and the associated schedule K1s, marking each as the final return.

I went through the step by step as follows:

Describe the partnership – I checked "This partnership ended in 2025"

Describe partnership disposal – I checked no entry

I then filled in the boxes of the K1 as received from the accountant.  The return went through the error check with no issues.  However, when I checked the forms the "Final return" box was not checked.

I checked the final return box on the form and ran the error check again.  This time it flagged me for not entering information on Schedule K1 Partnership Additional Information, Part II, lines 1-12.  These lines seem to pertain to the second choice of partnership disposal, where a partner sold or otherwise disposed of his partnership interest. They don't apply to this situation.

I'm not sure what to do here because it seems to me that Turbo Tax is erroneously asking for this data.

Any advice is appreciated.

[Mike9241]

doesn't matter. On schedule E, there is no way to indicate it's final.

seems you're using desktop and forms mode. Right below the final k-1 box there is a box that should be checked to indicate the partnership was discontinued in 2025.

However, TurboTax still requires some info on the disposition worksheet. I know what you are saying but humor Turbotax or 1) find other software to do your return; 2) file by mail. 3) Complain that the programming should be changed, but don't hold your breath.

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The reason for this is that if there were suspended losses, they will not be released unless termination is via a fully taxable transaction. In this situation, it's unlikely that there are any suspended losses 

actually even a voluntary dissolution could result in a taxable transaction

so check complete disposition in taxable transction  

check liquidate partnership interest which is what happen in this situation

enter dates ny you want they don't even have to be correct

enter 0 for sales price, basis and ordinary gain. i'm assuming there was no gain or loss on termination

nothing should appear on Fom 8949 or schedule D regarding this

[Masamenos]

Thank you.  I think I'll go with humor Turbo Tax lol.

[Rick19744]

I don't think we have sufficient information to determine that "nothing" should go on form 8949 and Sch D.

If your liquidating distribution exceeds the tax basis, then there will be a gain.

If you liquidating distribution is less than the tax basis, then there will be a loss

If there were property distributions, this could impact the overall gain or loss AND any property distributions will take a substituted basis.