The IRS link below says that when you change entities the change is treated as a liquidation, so both would be reported. Depends on whether you put an effective date on the entity change request.
Change of Entity
You could file as a schedule C and explain it to the IRS later should there be an issue. Since the K-1's flow through to the 1040, there shouldn't be any additional taxes owed, just different forms/returns.
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