If the partnership sold an asset owned by the partnership, each partner's share of the capital gain will be reported on his K-1 form, like other partnership income and expenses.  In Turbotax, all you have to do is enter the amounts from the K-1 as usual. 

The income reported will increase your outside basis, and the cash distributed will decrease it.  This is true for all types of income, not just a capital gain.  But you don't have to report your outside basis anywhere on your tax return until you sell or otherwise dispose of your partnership interest - see next item.

If on the other hand you sold your interest in the partnership to a third party and realized a capital gain, you report the transaction on form 8949, like any other sale of a capital asset, such as shares of stock.  You report the amount received as the sale price and your outside basis as the cost.

Hi - I have a form K-1 that reports a cash distribution I received from my private employer for which I have equity (stock options).  I was advised to report it as a sale of stock as my tax basis is $0 but how do I report how I originally acquired the stock? None of the options (bought, inherited, gift, divorce, short sale, etc. ) apply. There is an option for receiving stock as a result of other corporate activity but then TurboTax won't let me proceed until I select how I originally received the stock! Thanks for your help!

It sounds like you are getting guidance for a non-dividend distribution of in excess of your stock basis, which is taxable as a capital gain.  You would need to know your stock basis to know for sure if the entire distribution is taxable.  Because your stock was obtained via "options", you would need to know the basis in your stock. 

Your basis in the stock depends on your initial basis in your stock, and the activity from your K-1s since that time. See this IRS website for a good overview of your stock (and debt) basis for S Corps.

The initial basis in your stock depends on the value of the stock when you received it, less any amount you had to pay, the net of which should have been reported on your W-2 at that time you actually received the stock.

To report the long-term gain for a distribution in excess of basis (distribution up to your basis is not taxable),  click the "magnifying glass Search" icon on the top row, enter "investment sales" in the search window and press return or enter, and then click on the "Jump to investment sales" link.  After Yes you sold, and No for 1099-B, choose "Everything Else".  Enter a description (e.g., Distribution in Excess of Basis), the amount in excess of your basis, and the date you received the distribution.  Your cost basis will be zero for the amount in excess of your basis.