Thanks Hope, but no that is not what I was asking. I was just trying to make sure that the cost basis adjustment on the 1099-B was correct which can nearly or will remove any capital gains from the 1099-b. In the scenario I listed the cumulative adjustment would take the sale price vs adjusted cost basis to 0. The entry of the K-1 information would capture the required tax liability on the 1040 with the Current Year Net Income (loss) from box L in the K-1 (form 1065). I am just confirming that I am not missing any tax liability.
Thank you
