Am new to this one, New client comes in with final K-1. Jan 1 2006 beginning capital account (deficit balance) was ($20,376) and received a final distribution pf $13,600 which I assume is a negative capital account balance of ($33,976) (Correct ?) Does this go on a Schd D ? Thanks for any input. Steve
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A negative capital account is not the same as the partner's basis in the partnership. You put the distribution on Schedule D, but you have to figure out the partner's ending basis to determine the amount of gain or loss that is reported on the Schedule D. -
As jerome said the capital account (inside basis) is not always the taxpayers basis (outside basis). However, in a partnership liabilities usually add to basis and it is common that when you have a negative capital account you have liabilities that provided the funds that created the negative account. Therefore, the capital account may not be the only thing that determines cost basis for final distribution on Sch-D.Comment
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