I know you're aware of this. But I'm making a point here. So bear with me.
If at the time you placed the property in service, the FMV on the date of conversion was less than what you paid for it, that means depreciation was figured on the lower FMV cost basis, and not what you actually paid for it. That means you flat out can *NOT* report the sale in the SCH E section of the program. Period. If you change the cost basis in the SCH E section, that will totally screw up the depreciation. So reporting the sale in the SCH E section is just flat out not an option.
You must convert the property to personal use in the SCH E section of the program. To do this, as you work through each asset you'll select YES on the screen that asks if you stopped using the asset in 2020. Then on the "Special Handling Required?" screen, you have to select YES. If you select NO, then you are "FORCED" to enter sales information. Since the SCH E section has the wrong cost basis for determining gain on the sale, you can't enter your sales information in the SCH E section. So that's why you convert the property to personal use with a conversion date the same as the closing date of the sale.
Then using the "correct" cost basis, you report the sale in the Sale of Business Property section, and in that section only.
