Ok. Your response makes sense.
Liabilities do come into play for partnerships in some instances; meet tax allocation requirements, etc.
But for most purposes the liabilities only come into play if you would have used "debt" / liabilities for at-risk.
This is not the case for you.
So since you never had any "negative basis" which would require debt to qualify for the allocation, you can ignore the debt figures when determining your overall gain or loss. This is the case for most investors.
As you can see, when reviewing the liability section in your facts, the liabilities impact net to zero; leaving you with just your tax basis amounts; which also then net to zero.
It appears that you now know what your tax basis is and can input the correct values to arrive at no gain or loss upon the sale of the investment.
And "yes" the Section 1231 gain increases basis. It was the sale of the property at the entity level that generated this gain, and since the partnership doesn't pay the tax, you do. As a result, this increases your tax basis.
This was also the reason you were able to receive the large distribution in the same year.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
