In simple terms (please ;) how is the capital account used in sale of a partnership?

[Redheather]

I am selling an LLC, and have the capital account on the 1065s running pretty low....how does this affect the sale?

[MichaelL1 · Accepted solution]

The capital starts with the money you put and is reduced by money taken out and losses claimed.

So when you sell your interest if the capital account (or your basis/cost) in the partnership is small, you will have a larger gain to report than if you had a large capital account.

Two things matter, what you sell if for and the remaining basis/cost of what you sold. 

[Redheather]

thanks!  Trying to reconstruct what other preparer did...kept the capital acct the same each year by adding and subtracting expenses for the year, so cap account stayed the same forever...doesn't make sense..others I have subtract expenses and capital account goes down each year.