@kstheory This is a subject that quickly gets so complicated that a tax professional ought to be involved. I can provide answers at a simplified, top-level. But if someone needs to get into the nuances (i.e., the moment the capital account goes below 0, they're into detailed calculations and definitions) professional help is the answer.
I don't get the sense that you're trying to change the end result of the answer above:
- Don't check the "All my investment is at-risk" box
- Don't assume that you have to declare distributions in excess of basis simply because capital account is below 0. The nonrecourse liabilities provide basis.
Getting deeper than that is, in my mind, best avoided by simply keeping capital accounts positive.
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**Note also, I'm not a Tax Preparer/CPA. Just a volunteer, seasoned, TurboTax user.
Use any advice accordingly!
