Deceased tax return and an LLC Partnership K1

[RonGoe]

I am completing the 2021 tax return for my father who passed in 2021. He had a 25% partnership in an LLC that was passed on as an inheritance to the children. When filling out the K1 section of Turbo Tax for the LLC, it comes to the section titled Describe the Partnership. One the options is: 

Disposed of a portion of my interest in the partnership during 2021

When choosing that option it comes to the Tell Us About Your Sale screen.  I select  the option:

Ower Died and Interest was Transferred

When choosing that option it wants me to enter the Sale Dates, and Sale Information. Does any of this apply, or do I just skip the section Describe the Partnership (Disposed of a portion of my interest...) and choose none of these apply?

Thanks for any help.

[GeorgeM777]

Yes, none of these apply because you do not report the transfer of the limited partnership interest on your father's final tax return.  What does get reported on your father's final tax return is any partnership income.  Such income is characterized as income in respect of a decedent.  The IRS has stated the following with respect to such income:

• If the decedent had been receiving payments representing a distributive share or guaranteed payment in liquidation of his or her interest in a partnership, the remaining payments made to the estate or other successor in interest are income in respect of a decedent. The estate or the successor receiving the payments must include them in income when received.

See this link: Publication 559 (2021), Survivors, Executors, and Administrators

Regarding the beneficiaries who have inherited your father's limited partnership interest, the beneficiaries will include on their respective returns the limited partnership inheritance.  Each beneficiary needs to receive a Schedule K-1 from the estate which reflects their inheritance and thereafter, each beneficiary will report their K-1 on their personal return.

@RonGoe

[RonGoe]

I thought that might be the answer, but I wanted to be sure I did this right.

Thank you so much for taking the time to reply!