partnership distribution beyond basis question

[nwtaxlady]

My client has a very small partnership with his brother. This year his beginning basis was $549 and income $420 and has withdrawals & distributions of $2077.
So he took out more than his basis. 549+420=969 and took out $2077 leaves a negative <1108>. I believe this is taxable as capital gain. I haven't seen one of these situations in years, so correct me if I am wrong. And so how do I report it on Sch D? Do I just put it under Long Term and description of "Excess of distribution over basis" and put in the $1108 with no cost? Then would his beginning basis next year just be zero?

Like I said, I haven't had this situation in years so need guidance of what to do exactly.

Thanks

[DianeOffutt]

Partnership Debt creates Basis for partners

Does the Partnership have any debt? If so you have to allocate it towards basis before capital gain is considered.

[nwtaxlady]

No, the Partnership has NO debt!

[DianeOffutt]

ST or LT CG treatment would be based on the partners holding period of his interest in the partnership.

[DianeOffutt]

Report on form 8949, then Schedule D

Excess distributions over Partnership Basis is reported on form 8949, zero basis, then transferred over to Schedule D, either ST or LT depending on holding period.

[Roland Slugg]

Before treating the excess distribution as income, I would talk to the partners about it and explain the tax consequences. It's quite possible the partner will want to return his excess withdrawal to the p'ship, treating it as a loan during the interim.

[nwtaxlady]

Excess distributions over Partnership Basis is reported on form 8949, zero basis, then transferred over to Schedule D, either ST or LT depending on holding period.

ok.. and just put "Excess distribution over basis" for description?