How does one handle a Negative value for a Cumulative Adjustment to Basis on a K1?

[wesleysteffan]

I purchased stock in a LLC in 2016 and sold it in 2017. I received a K1 which included a sales schedule. I provided my sales proceeds(3)and purchase amount(4).  The company provided negative values for the cumulative adjustment basis of $-2304(5) and ordinary gain of $1677(7) In their instructions, they stated to come up with Total gain/loss(6),subtract the amounts in 4 and 5 to determine the total gain and loss(6).  Subtracting a negative number results in adding it to my basis and thus reducing my overall taxable gain. Is this approach correct?

[Rick19744]

A couple of questions:
1) What was your initial capital contribution and any distributions?
2) On your K-1 Part II Section L.  What box is checked?

[wesleysteffan]

1. Initial  capital through a stock purchase was $14165.  Stock sold later for $17249.   Under  section L beginning capital was $12611.  Ending $12155.  Section 19 from part iii was $293.  
2. Tax basis box is checked.

[Rick19744]

Hard to analyze over a forum, but something is not working based on the information provided.
A couple of follow-up questions since tax basis is checked on the K-1:
1) In Section L what is reflected on the distribution line?
2) Are you saying that only $293 is reflected on your final K-1 in box 19 code A?
3) Are you saying that Section L on your final K-1 reflects an ending balance of $12,155?

[wesleysteffan]

Section L
1.Beginning Capital.                       $12,611
Capital contributed.                             . 0
Current year increase (decrease).      . -456
Withdrawals & distrinbutions.         $12156
Ending Capital                                       0
Tax basis checked

2.  19 Distribution                               $293 code A

3.   Withdrawal Distribution.             $12155

Thank you  for your review

[Rick19744]

Ok.  We are closing in on the final answer.
Just want to confirm that aside from the above, you received separately cash in the amount of $17,249 for your interest in the  LLC.

[wesleysteffan]

Yes. I sold my total interest in the LLC in2017.  It was held less than a year

[Rick19744]

Based on your responses, I arrive at the following:

• While you should maintain a separate tax basis schedule, since the K-1 is marked tax basis we will use that to support your recognized gain or loss.
• Beginning of the year tax basis amount is $12,611 less current year loss equals $12,155
• The withdrawals and distributions amount of $12,156 is a plug to get the K-1 to zero, however, I am assuming that this amount also includes your current year distribution of $293 as reported in box 19 code A.
• Tax basis amount of $12,155 less current year distribution of $293 equals a tax basis of $11,862
• Cash received for the LLC interest $17,249 less your tax basis of $11,862 equals a gain of $5,387
• This gain is reported on the applicable form 8949 and Schedule D