@fred7777 I don't see a reply by me, but I am getting old. 

1. Yes I would file with zero for federal, just to be safe

2. Ultimately you do need to do an accounting and posting it on a 1065 ain't a bad idea. 

3. No response needed.

Later you talked about NJ.  I do not get the impression this is a "business" and you might interpret that NJ does not require registration, but you already have. Maybe you take the stand that you are now a general partnership which seems to make it even worse with NJ. Maybe file with NJ and pay the $75 fee as a form of insurance. All of that is really outside my experiences. Bob has a much better handle on the estate planning than I do. 

Possibly doing a LLC was not a good decision. Paying for a big liability insurance policy would have been a better choice with the two of you as tenants in common. That is what I would do. 

Best of luck. 

P.S. you don't want to do Jerry Lewis jokes. I was really trying to restrain myself from referring to "Song of the South"' and Tar-Baby. This reminds me of Brer Rabbit's encounter with Tar-baby. I guess I have failed.