DanielV01
Expert Alumni

Business & farm

It depends, but you are probably safe to file Schedule C instead of Form 1065, because your entity has not filed a business return before.  So if you operated as a sole-proprietorship (as only you generated income and were solely responsible for expenses), then you may have grounds to file as a sole-proprietorship on Schedule C even though the initial intent was to be a partnership,  However, another question is if you legally have to dissolve the partnership or not first before you can claim the activities on Schedule C.  That could depend on state/local law.  

If you were required to register in your state as a partnership, you may have to report as a partnership on Form 1065 anyways.  You can have 100% of the activities apportioned to you, and he can select that he did not materially participate in the activity.  But if state and local laws require you to dissolve your partnership first, then that's what you'll have to do.  If your partner wants to be completely out, you will want to take the formal step to dissolve the partnership and make sure the return is marked Final Return so that the IRS does not ask questions next year when you don't file.

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