I had capital contribution to a S corp few years back, thus being a limited partner in the company, but only until recently the business was sold for a small margin of profit and my initial capital invested was returned for the most part through distribution. However, I received a K-1 this year where business income (box1) was nearly the same as my distribution from selling the business. But the distribution (seems like) includes most of my initial capital contribution. Am I liable to be taxed on my initial capital contribution? For example, initial capital invested was $20K since business started. I had received no distributions until now when business is sold. Distribution in my K-1 is a little more than $20K (I assume my marginal profit gained from sale of the business), but business income is about $20K on the K-1 (box1). Am I to pay tax on my initial capital investment on top of the small profit gain?
