Because it appears that your daughter will still be filing a Schedule C for 2021, we can provide some general guidance on certain issues that you will probably need to consider for tax years 2021 and 2022. It may be appropriate to retain the services of a qualified professional who can provide advice regarding tax issues specific to the closing of the Schedule C business and the transfer/contribution of property to the partnership.
In connection with closing the Schedule C business, as it appears this will be the final year of that business, you will need to show a disposition of the business assets. Moreover, because a partnership is involved, for tax year 2022, you will need to purchase TurboTax Business which is a different application from TurboTax Home & Business.
With regard to the depreciated assets that are being transferred, such transfers are generally tax-free to the contributing partner. Your daughter would then receive a credit to her capital account for the contribution in the amount of the current value of the property. Your daughter may have a taxable gain if she was relieved of any liabilities associated with any transferred property that was subject to debt to the extent such relief from liability exceeded her basis in the contributed property.
You would not need to depreciate the inventory as inventory is never depreciated. The cost of inventory is only deducted when the inventory is sold. To the extent the cost of any unused inventory has already been deducted, you would not deduct it again when the inventory is eventually sold by the partnership. Additionally, the transfer of the inventory from the Schedule C business to the partnership will become part of your daughter's capital contribution to the partnership.
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