I will not be showing the repair expenses on tax return as they were covered by the insurance settlement
For starters, if the property(s) were so badly damaged as to be unrentable, I "seriously" doubt the work would be classified as "repairs". Not even close. More than likely it will be classified as a property improvement.
Also, you *have* to report the insurance payout, because it's taxable income. Remember, you got to deduct the insurance premiums you paid on that property each and every year as a rental expense. Therefore, any payout on the policy is reportable and taxable income.
Do I not list these two properties on 8825 since they had no income?
The only way to "not" list them, is to distribute them to one or more of the owners making them personally liable for any and all taxes due, as well as taxes paid on the property. So don't do that. YOu can however, remove the properties from service effective Jan 1 2019 so as to stop depreciation on the assets. But if the restoration of the property is carrying over into 2020 I would "HIGHLY" advise you seek professional help for this on the 2019 partnership return. This is especially important if your state, or the state of any one of the partners in this partnership taxes personal income.
While Turbotax Business can handle your situation just fine, if you don't know what you're doing you "WILL" screw it up. The audit that would follow will not be a pleasant experience either and the potential fines, penalties and back taxes (federal *and* state) will make the cost of professional help seem like a pittance in comparison. One advantage of professional help is that it can be paid for out of the parntership, thus making it a deductible expense for the partnership.
So my recommendation is that you seek professional help yesterday, if not sooner since the partnership return is due with a drop dead date of March 15th. Late filing penalties are $200 per month, per partner and the penalty is not a deductible expense either.
