Final 1065 required when 1 partner of PLLC dies?

[MaryMatt]

PLLC was taxed as partnership.  One partner died making it a single member PLLC.  Is a final 1065 return required?  Filed 24 return, but did not mark final.  Entity continues with the one partner. 

[sjrcpa]

When did the person die?

You probably have a short year 1065 and a short year Schedule C.

[MaryMatt]

in 24. 

[sjrcpa]

If you only did a 1065 for 2024 that was incorrect.

[IRonMaN]

Unless the dead partner had a beneficiary take over his ownership interest.  But while we are on the subject, whatever did happen to the dearly departed's share of the business?

[abctax55]

"  ...   Entity continues with the one partner."

By definition, a partnership must have 'more than one'.

As the others have stated it sounds as if 2024 should have had a short year F 1065, with the remainder of the activity on a Sch C.  And yes, the F 1065 should have been marked final.

But Jeff just raised some good questions about what happened to the dead partner's 'share'?  

[MaryMatt]

she paid heirs an amount for the deceased interest.  

Can I just let it go that it was not marked final? and ask forgiveness if caught? 

[TaxGuyBill]

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@MaryMatt wrote:

she paid heirs an amount for the deceased interest.  

Can I just let it go that it was not marked final? and ask forgiveness if caught? 

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That is the date the Partnership ended.

I'm crazy tired so maybe this doesn't make sense or I'm mixing something up, but did the 2024 Form 1040 report the gain/loss of the end of the Partnership?  Doesn't the "final" 1065 usually trigger reporting of gain/loss of the Partnership interest, based on the Basis?  Marking the 1065 as "final" isn't a big deal, but reporting the gain/loss of the Partnership Interest is important.

[sjrcpa · Accepted solution]

No gain/loss when a Partnership becomes a single owner entity.

But heirs have a gain/loss in their buyout, reportable on their 1040s. Difference between their basis (date of death FMV +/- their share of partnership income/loss) and the sale price.

How much time elapsed between death and purchase from heirs?

How did you allocate the 2024 income/loss between the partners?

[TaxGuyBill]

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@sjrcpa wrote:

No gain/loss when a Partnership becomes a single owner entity.

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Thanks.  I couldn't quite remember how Partnerships work (in contrast with S-corporations) in that regard.

[MaryMatt]

I only did one partner's return.  Correct, entity continues.  I did allocate income/loss on the partnership return.