Since you are filing a final return, any distributions are considered liquidating distributions and are reported on a form 1099-DIV (boxes 9 and 10) and NOT as distributions on the K-1.
So the inventory distributed is a liquidating distribution and valued at FMV.
Any property distributions by the S corporation are deemed to be sold by the S corporation and gain is recognized at the S corporation level. In your case, you don't show a negative to zero it out. You just reflect the inventory as being sold and no ending inventory. You then take a FMV basis in the inventory distributed to you.
You should also file form 966.
And don't forget you may have some some filings with the Secretary of State to close the company.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
