Oh, wow. The good news is, there still is time to amend that 2019 S Corp return and the 2019 Partnership return.

Let's take it a bit at a time:

"Family ptnrship name is on the real estate title in 2019. Family ptnrship purchased land.The Land was booked on the family S Corp (residential construction co)."

Which is an error. The S corp didn't own the land, so it is not the corporation's asset or debt. I don't know what "booked" means, beyond these general comments. And it's never a good idea for an S Corp to hold real estate, anyway.

"The S Corp was started in 2019."

Yay! Easy to amend.

"A house was built on the land by the S Corp and sold in 2020."

The investment of the S Corp is on someone else's property, then. What you could do for 2019 is either:

Have the Partnership hire the S Corp for construction of a Spec Home.That way, the Costs are costs and the "price" is the reimbursement from the Partnership for the costs, as the customer (which can agree would be paid to the S Corp upon sale). The S Corp would not have any asset, then; not even the building(s). The S Corp would have WIP (work in progress) over the 2019 year end. It has costs and income for 2020.

Or, have the S Corp create a promissory note to buy the land once the improved property sells, with some sort of agreed-upon value for that land only; plus, an agreement that the S Corp is acting as a developer. These are legal issues to be resolved by a lawyer and are not a tax issue. You have to establish the relationship properly. Now the S Corp has the improvement asset and the partnership has the land asset.

"The S Corp shut down after building the one house."

Once again: we see bad guidance for entity formation given to innocent people. Sheesh.

"The ptnrsh received the 1099-S ($515,000) at sale."

You have to look at the Deed or Title. The Owner is who Sells something. You cannot sell something you do not own. The S Corp never was the owner of the RE. Of course the partnership gets the 1099-S.

"The ptnrship sent S Corp a 1099-S ($515,000)."

That's a mistake. The partnership did not Close the sale; a title company or other entity would issue the 1099-S. The 1099-S issued by the partnership to the S Corp also implies the S Corp bought the Improved property, which isn't what applies. Or, bought the land for $515,000  🙂

"Lacerte does not allow form 8949 code N on the ptnrship return."

I read it like this:

Partnership owns land in 2019.

Partnership hires S Corp as the Contractor of record. Partnership is either Customer, or S Corp is "co-investor" by creating their Improvement asset cooperatively on someone else's property.

In 2020, property sells.

Partnership sold land to S Corp "at point of closing" the improved property.

What you didn't mention is who is the shareholder in the S Corp. Is the partnership involved in the S Corp? Is the S Corp involved in the partnership?