i inherited a tax return with a k1 with no inc/exp on the k1. the k1 did show a cap acct at the beg and end of the yr being <94000>. The taxpayer only knows he put in $10k 10 yrs ago, and the losses from the ptrshp absorbed that in the first 4 yrs. the taxpayer said he never put another dime into the ptrshp. he said he had a lot of passive loss carryforwards and at risk carryfowards that should absorb his sale of the ptrshp interest that should be finalized in fall of 2008. he wants me to tell him the tax ramifications of the sale of the ptrshp. with no ptrshp basis i am not comforable with this situation. can someone help? his accountant "no longer does taxes", so the only thing I can go on is his inital cap contribution of $10k and prior yrs returns unallowed passive losses and form 6198....the ptrshp was organized as an llc with no recourse loans or liabilities. if the taxpayer didn't have any basis left, no responsibility for any loans or liabilities, can the <94000> cap acct be used to offset any cap gains from the sale of the ptrshp?
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No you can't use the <94000> capital account to offset gain. You can only use basis to offset gain. If his prior year $10K contribution has already been used up so that his current basis is zero, then all of the gain in 2008 will be taxable. Unless some of that $10K is suspended under the passive loss rules. You can use suspended passive losses to offset a current gain. You cannot use suspended at-risk losses to offset a current gain, unless you have other additions to basis.
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