I am a limited partner in a business that converted to a C Corp on 12/31/2019. I have passive losses (including passive carry-over losses from prior years) for a small amount which is well under my basis. As the partnership ended my understanding is that I should be able to recognize the passive losses in 2019. All of my investment was at-risk.
In turbo-tax online, I am trying to figure out what to select to accomplish this. When I select partnership ended in the K-1 entry section, and "disposition not via sale", turbo-tax suspends the loss and tries to carry-over to 2020. I think this is incorrect as with the partnership being over, the passive loss should be recognizable.
If I choose complete disposition, turbo-tax asks for a sale amount for my partnership units. I did not receive any proceeds from the conversion, but did get ownership in the new C corp (specifics not disclosed by the new C corp). I am leaning towards choosing complete disposition and entering the same amount for basis and sale amount for the partnership units, creating a net zero gain/loss, and this does allow the passive losses to be recognized in the program for 2019. However, I am not sure how the partnership (now C corp) handled and reported the proceeds from converting my partnership units to the IRS.
Any idea on the best way to handle this in turbo-tax, and am I correct that I should be able to recognize the total passive losses (with carry-over) since the partnership is now a disregarded entity.
