Thanks for the all the replies so far. To clarify, this was NOT a conversion for tax purposes only.
On 12/31/2019, all partnership members contributed all of their units to a newly formed C Corporation (New name, new EIN), in exchange for shares under IRC Sec 351. As a result, the partnership became solely owned by the C Corp. A disregarded entity will be included in the C corp filings going forward. As another result, the K-1 was also marked final. The C Corp will not issue a K-1 in the future.
Looking up U.S. Code § 351 (https://www.law.cornell.edu/uscode/text/26/351), the very first entry under section (a), General rule says "No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation"
So, I am left to believe that 1) The partnership is now a disregarded entity, and with this being the final K-1, passive losses can be recognized by limited partners because all units were disposed of (in exchange for shares of the new C corp) (this part I am not sure about) and 2) under IRC 351 I cannot recognize a gain or loss (this part I am sure about)
To get turbo-tax to calculate things correctly, it looks like I need to enter that there was a disposition of all shares (to trigger the passive loss to be used in 2019 and not suspended and carried forward), and as for proceeds, sale price = basis so that no gain or loss is recognized under IRC 351. However, this is clunky and I am not sure if there is a better way to handle things.
