What to do with "Tell Us About Your Sale" when LLC dissolved

[aeshaw01]

My husband and I dissolved our LLC at the end of the year, so in the TurboTax Deluxe interview, I selected "Complete disposition" and "Liquidated Partnership Interest".  Please let me know if either of those options are incorrect.  Why does it go on to ask for sales information when we didn't sell the business nor our individual interests in it?  Do I need to fill it out given that there was no sale?  If so, would sale price and selling expense be zero?  What would I put for partnership basis?  We expensed all of our purchases at the time of purchase, didn't maintain an inventory, so I left our K-1 capital account analysis blank and our Schedule D blank (perhaps that was incorrect?) when I filed our 1065.  We did have some income from liquidating our property last year, so we have some ordinary gains.   Thanks in advance for any guidance!

[DaveF1006]

You would report the K1 exactly the way it is prepared from the 1065. Reporting partnership basis is not critical at this K1 stage but was important when you reported the sale of the liquidation of your property when you prepared your 1065.

As far as your Turbo Tax Deluxe entries go, when you reach a screen that says Describe the Partnership, indicate it ended in 2020. The next screen will state Describe Partnership Disposal, check disposition was not via of a sale. The next screen will ask for purchase date and sale date, leave these blank unless you get an error message in the end and then you can enter the dates when you purchased the partnership interest and when it was sold (disposed). 

Now the only thing that concerns me is if you reported the liquidation of your property in the 1065 because the information would have been passed through on your K1 to report on your individual return.

[aeshaw01]

Thanks Dave!

While waiting for a reply, I had selected "complete disposition".  I found the worksheet on p. 3 of the IRS's K-1 instructions to calculate and enter the partnership basis but left blank the sale price and all other fields on that screen.  Now that I changed to "disposition was not via a sale" as per your instructions, I went from a refund of >$700 to tax due ($14).  Any idea why?

As far as liquidation, I reported the sale of business property on the K-1 in box 1, Ordinary Business Income, since I never capitalized it as inventory, just expensed it in the year of purchase.  The property I was unable to sell before dissolving the LLC was treated as a final distribution in box 19 with code C, alongside the final distribution of cash (the proceeds from the successful sale of property) with code A.  Could you please explain your concern and how I should address it?  

Thanks,

Allison

[aeshaw01]

@DaveF1006 , I just opened up the forms view and I see that TurboTax interprets the option "disposition was not via a sale" as being a gift of partnership interest, not a dissolution of the partnership, because on the K1P Addl Info 2 worksheet, it checked the box 1b: "Check if gifted partnership interest".  So I don't think this is the correct option for my situation.  There is a "no entry" option for "Describe Partnership Disposal", but no explanation as to when if ever that would be an appropriate selection...  Maybe I need select "Complete Disposition" and follow the advice at https://ttlc.intuit.com/community/taxes/discussion/k-1-complete-disposition-vs-disposition-was-not-v...?  But wouldn't it be double-counting for me to enter the proceeds of the sale of expensed property twice, both in K-1 Box 1 (ordinary income) that I already filed, as well as for the sale price as @Rick19744 recommends?  Perhaps I should keep these proceeds in the partnership basis rather than moving to the sale price?