As noted by @Mike9241 you need to determine your tax basis.
Your tax basis is NOT the same as your capital account.
There are several missing facts here that are key in addressing your question:
- You indicate "zero capital account to start". Does this mean you did not contribute any cash upon forming the LLC?
- It is key to understand how you obtained your LLC interest; contributed cash, an LLC interest for services, etc. If the later, this complicates the issue even more.
- You need to determine your tax basis. This begins with your initial contribution and is adjusted every year for the applicable items on your K-1. The LLC is not that old and you should have sufficient information assuming you have your K-1's from the inception.
- While your capital account can go below zero, your tax basis cannot go below zero.
- For the $$ at stake here, based on your facts, I believe it would be in your best interest to pull together all your K-1's and meet with a tax professional. This individual would be able to help you determine your tax basis, determine if you have correctly filed your tax returns and then determine the tax impact to you as a result of the LLC liquidating / closing. This should take a couple hours at most and the money spend will allow you to understand if you need to amend any prior returns and then file an accurate 1040 for 2020.
*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.
