how to input sales of one partner 's share (50%) in the final 1065

[xuan150279]

Hello, I am filing the final 2020 1065 partnership return (2 partners) and one partner sold her share (50%) to the other partner (my client). I don't know how to put this sale in the final 1065 tax return.

Besides, she sold her share in Dec 2019 but the previous tax preparer did not file the final return 1065 for the 2019 tax period. Do I have to file the final 1065 return for the 2020  short tax period? if yes, do I have to file the sole proprietor for my client for the 2020 tax period? 

What should I do to convert from partnership to sole proprietor? 

[sjrcpa]

Sale of one partner's interest to the other partner is not reportable on the 1065.

The Partnership terminated in 2019. There is no short year filing for 2020.

[dkh]

Was the sale date Dec 31 2019?  Can you amend the 2019 to mark as final?   

For 2020 - to convert from F1065 to Schedule C - just prepare Sched C with LLC name and EIN

[IRonMaN]

The IRS would never even notice that "final" mark on it.  Just let it die a natural death and move on to the 2020 schedule C.

[xuan150279]

Yes, the date of the sale was Dec 31st, 2019. Yes, I can amend 2019 to mark as final. 

For the sales of the share ($15,000), when amending 2019, how can I put this sale? 

thank you for your response

[sjrcpa · Accepted solution]

The selling partner reports the sale on his 2019 1040. 

Again, it is not a partnership 1065 transaction.

[qbteachmt]

"For the sales of the share ($15,000), when amending 2019, how can I put this sale?"

It's not a Partnership activity. It's between the partners, and that makes it personal.

[dkh]

I've never had a 1065 that I didn't mark final when it was final .....but I trust the experience of @IRonMaN and @sjrcpa ..... let it die a natural death - don't amend.

On the sale of the shares.   It is not reported on the F1065 - it is a transaction reported by the selling partner on their F1040   (as @sjrcpa  answered twice)

[xuan150279]

Thank you for your information

[xuan150279]

thank you. It is helpful

[dd4vols]

I don't know that in the history of the forum, that i have ever disagreed with @IRonMaN  , but I would go back and amend the 2019 and mark final.  I would fear some computer at the offices of Irving R. Shyster would generate that dreaded non-filing penalty for 2020 return.  The penalty is $210 for each month or part of a month (for a maximum of 12 months) the failure continues, multiplied by the total number of persons who were partners in the partnership during any part of the partnership's tax year for which the return is due. So, if you get that, you are going to spend time resolving that...and good luck getting it resolved via mail. 

[sjrcpa]

But the partnership did not exist in 2020 so there is no 1065 due for 2020.

[dd4vols]

that/s why I said amend the 2019 and show final. The IRS will not just assume it's dissolved in 2020 I don't think.  Just trying to not get in a correspondence war with the IRS for an unnecessary 2020 Form 1065.

 I actually had the following convo with an IRS person yesterday  (only a 47 minute wait), regarding 941 situations.  She told me that there were tons of 2020 Q3 mail-in Forms 941 that were opened and processed BEFORE those clients 2020 Q2 Forms 941 were opened and processed. So all the overpays applied forward (if any) were not recognized in Q3., Been fighting this paperwork battle for months before the 'live' person helped resolve it yesterday.

And finally, just this month, got a paper filed 1040X for 2018 to be recognized and update a client's file to remove a $35k Obamacare pay situation.

Just trying to avoid being at the bottom (or even in the middle) of those 11 million unopened documents.

[IRonMaN]

Who Must File
Domestic Partnerships
Except as provided below, every domestic
partnership must file Form 1065, unless it
neither receives income nor incurs any
expenditures treated as deductions or
credits for federal income tax purposes

If the partnership ended in 2019, it kinda sounds like they wouldn't have any income or expenses in 2020,   so I'll still stick with my answer.  If I had more faith in having someone at the IRS actually pay attention to a no change return, I would say go for it ------------- but I don't have that much faith.