@nganha19
If the 2019 partnership return was not marked as a final return, then a final return must be done, if for no other reason than to distribute the remaining partnership assets. If the 2020 partnership return has already been filed, the least complicated "fix" (in other words, the lesser of the evils), is to amend or supersede the 2020 return.
This superseded return must be marked as a final return. The Schedules K-1 must be marked as final as well. As far as the split of income is concerned, the split can be weighted. Most software has a feature that allows the preparer to state when the interest in the partnership changed. In this case, on January 1 (presuming a 50/50 split), the interest was 50/50. On January 2, the interest changed to 100-0. This weighted split will produce a very nominal amount of income on the K-1 for the prior partner (basically 50% of 1 day's worth of gain or loss), and the rest of the income will go to the now sole-member. Beginning 2021, this individual will be able to file Schedule C unless there is another change.
Another option is to try to supersede the 2019 return and make it a final, but if you've seen this thread, you will realize that doing so is complicated. Plus, you then have to convince the IRS to annul the 2020 1065. Then re-do everything on the Schedule C, and hope the IRS doesn't question everything in the process. They could well question the recommendation I give also, but it will be much easier to prove with fewer "moving parts". In addition, the result should be just about the same, since business expenses on the partnership return are essentially the same as as Schedule C, and from a partnership return the income that passes through will also be subject to self-employment tax, just as net income on a Schedule C.
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