While we don't have the history, based on the information presented, this makes sense.
As a partner in a partnership, you need to maintain a tax basis schedule. This is your cost / investment in the partnership. This begins with your capital contribution and is adjusted each year for the applicable boxes on your K-1.
A few years ago the IRS mandated that the capital account on the K-1 be reported on the tax basis. While this may not be exactly the same as your tax basis, in most cases it is.
- Your tax basis begins with the (282)
- Next you factor in the current year activity that impacts your tax basis; this is the $34,389
- Combine the $34,389 with the beginning negative $282 you arrive at your tax basis of $34,107. This is the amount you report in TT as your cost basis.
- The distribution amount of $34,107 is your selling price which nets to zero.
- As you can tell from above, while the partnership passed through losses to absorb your initial capital contribution, there was a gain from what ever was sold at the partnership level represented by the amount on line 10 (and the rental income). You will pay tax on both of these amounts on your current tax return. While you pay tax on these two amounts, both of these amounts, as noted above, increase your tax basis.
- In summary, based on the facts presented, this makes sense.
*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.
