You will start with your personal return to "close" the SCH C business permanently and forever without disposing of it.
In the start of that section select the option to indicate that you "sold or otherwise disposed of this business" in 2019. Then continue working things through "as if" nothing changed. You'll enter any and all business income received prior to the closing date of the business (which will be sometime in 2019) as well as any and all business expenses incurred prior to that closing date.
Next in the inventory section, your EOY (End of Year) inventory balance for this SCH C business must be $0. So if there is any unsold inventory left in this SCH C business, simply indicate that it was all removed for personal use and that makes the EOY inventory balance $0.
Next, work through the business assets. You must work through each individual asset one at a time and for each one select the option for "I stopped using this asset in 2019". The stop date you enter for each asset must be identical and will the last day the SCH C business was open for business in 2019. You'll be presented with a "special handling required?" screen on each asset. Since you are not selling the asset (we're transfering it to the partnership) select YES and press on.
For each asset you will need to write down:
- The name of the asset exactly as entered into the program.
- The date the asset was originally placed "in service"
- The total of all prior year's depreciation already taken.
- SEC179 depreciation taken if applicable to that asset (and labled "as" a SEC179 deduction).
- The 2019 depreciation taken.
- The date the asset was removed from the business for personal use.
You will require the above data when you are entering these assets on the partnership return, later.
Finally, if you claimed "any" vehicle use (I don't think you did) even if it was less than 100% business use, you "must" show the disposition of that vehicle in order to separate it from the SCH C business. The simplest way to do that is to just indicate the vehicle was removed for personal use. Now if your vehicle was less than 100% business use that means you were required to maintain mileage records. Do not lose those records; ever! You will not need your vehicle use records for the partnership return. But you most definitely will need them down the road at sometime in the future when you retire and sell or otherwise dispose of partnership.
At this point once all the above is done you can go ahead and finish the rest of the personal 1040 tax return.
But do not even start your state tax return at this time. I don't know if doing the state return at this time will cause issues or not. Since I'm a total doe-doe on state taxes, I just don't want us to risk that at this time. I know for a fact that for what we're doing now (transferring assets & inventory) the state return doesn't matter. So I see no need to be throwing monkey wrenches around. 🙂
