I haven't refreshed myself by reading through this thread. But I am assuming you are dissolving the partnership on Dec 31 2022 and will wait until next year when you do your 2023 tax return to enter the property on your 2023 1040.
When I send that again, I can either tick the "Final return" box or leave it unchecked.
You'd check that box.
Then what? I was going to change our partnership to a sole proprietorship so that we could just do all our taxes on TT Home & Business, Schedule E.
You sure are hung up on that "sole priorietorship" terminology. 🙂
But you've convinced me that if change the partnership to a single owner, my wife, it doesn't make it a sole-proprietorship.
It's simply a passive activity.
Once I write up a contract where I give my 50% share in the partnership to my wife, can we still have bank accounts and get 1099-NEC's from our management company (that collects the rents) all in the name of our LLC using the LLC EIN, but then just enter it in Part I, as if we were just individuals making rental income?
Change things with the management company where they provide a 1099-MISC (not 1099-NEC) with all income paid for "any reason" concerning the rental, in box 2 of the 1099-MISC. No other box should have any income paid to you reported in it. Since you're filing a final K-1, the partnership is closed and the EIN for that partnership is no longer active. So they will issue the 1099-MISC to any one of the owners using the SSN (not an EIN) of that owner. I really doesn't matter whose SSN they use, so long as it's one of the tax filers that owns the property, and is one of the tax filers on the joint return.
When you enter the property on SCH C in TurboTax 2023 next year, several things to note:
- On a joint return, you will have options to select the owner/income recipients.
a) tax filer #1
b) tax filer #2
c) Both of us
Simply select the "Both of us" option and press on.
- When entering the property assets, all information (with 2 exceptions) will be identical to what was on the 1065. I'm not sure, but I do believe the 1065 will produce two "unofficial" form 4562's that print in landscape format. One is titled "Depreciation and Amortization Report" and the other is "Alternative Minimum Tax Report". You will need those two printouts to enter everything on your 2023 return so it matches exactly. The only two columns that will not match (because you don't actually enter them) is the "prior year's deprec" column and possibly the "current year deprec" column.
I'm not 100% certain the 1065 will have the 4562's I mentioned above. So for the final printout of the 1065, select the option to save absolutely everything in PDF format. That's the only way to ensure you save all the forms and calculation worksheets. Then search that PDF for the two 4562's I mentioned above. I've attached below a screen shot of one of the 4562's I'm referring to. Just click it to open and view it.
