your initial basis is the value of cash or property you put in to the partnership. it goes up by profit down by loss and distributions and up by any section 751 income realized upon disposition. if it is using the cash basis to report income upon disposition you'll have, if the return is done right {sec 751 - (a)Sale or exchange of interest in partnership - The amount of any money, or the fair market value of any property, received by a transferor partner in exchange for all or a part of his interest in the partnership attributable to— (1)unrealized receivables of the partnership, or (2)inventory items of the partnership shall be considered as an amount realized from the sale or exchange of property other than a capital asset}. compare what you got, if anything upon transfer with your basis. that is capital gain or loss.
income is supposed to be allocated 1 of 2 ways. specific allocation. the books of the partnership are in effect closed on the date of transfer and profit or loss for the period is determined. then you are allocated your share based on your ownership % before the transfer. or per share ber day method. the income/loss for 2019 is divided by 365 and multiplied by the number of days you held your interest and then by your ownership %.
things become more complicated if there were loans used for basis. or if you had a 50% ownership interest then there was a technical termination of the partnership under reg 1.708-1(b)(2)
the partnership should consult a pro to make sure the proper reporting is done.
there can be substantial penalties if things are messed up
Failure To Furnish Information Timely
For each failure to furnish Schedule K-1 to a partner when due and each failure to include on Schedule K-1 all the information required to be shown (or the inclusion of incorrect information), a $270 penalty may be imposed for each Schedule K-1 for which a failure occurs. The maximum penalty is $3,339,000 for all such failures during a calendar year. If the requirement to report correct information is intentionally disregarded, each $270 penalty is increased to $550 or, if greater, 10% of the aggregate amount of items required to be reported. There is no limit to the amount of the penalty in the case of intentional disregard.
