Capital Loss

[mehta8808]

Client with other friends created an investment club (partnership) in 2000, each contributed

$2000. Every year they filed partnership return and each took K-1 loss or gain on investment trading. In 2006 they decided to close the investment club and final partnership return was filed

and each were isuued final k-1 and remaining capital of $500 as cash distribution.

The question is can my client take $1500 ($2000 intial capital - $500 cash distribution) loss on sch D

on his personal return.

Thanks for your help.

[ChEAr$]

Basis

Client with other friends created an investment club (partnership) in 2000, each contributed

$2000. Every year they filed partnership return and each took K-1 loss or gain on investment trading. In 2006 they decided to close the investment club and final partnership return was filed

and each were isuued final k-1 and remaining capital of $500 as cash distribution.

The question is can my client take $1500 ($2000 intial capital - $500 cash distribution) loss on sch D

on his personal return.

Thanks for your help.

You've got to reconstruct his basis in the club. Start with the 2000, then for each
year add gains and subtract losses through the final year. The last figure then is his
basis, and that is either a gain or loss.