You're touching on an important and common observation in partnership liquidations. In a complete liquidation, the final Schedule K-1 does indeed show an ending capital account of zero, which means that over the years your basis has been adjusted by income, losses, and distributions until nothing remains. In other words, your adjusted (tax) basis has been fully "used up" by the time you receive your final distribution.
Here's the key point:
Tax Basis Adjustments Over Time:
Your tax basis starts with your initial investment and is increased by income items and decreased by losses, distributions, and certain other adjustments (like syndication expenses, if applicable). These adjustments accumulate over the years.
Liquidation Outcome:
When the partnership is liquidated, the final distribution you receive is intended to return your remaining basis. If the final distribution exactly equals your adjusted basis, then your recognized gain or loss on the liquidation will be zero—because there's no excess received over (or shortfall compared to) your basis.
Your Observation is Correct, Generally:
Yes, if the final K-1 shows that your ending capital account is zero and the final distribution equals the final adjusted basis, then for tax reporting purposes your "sale price" equals your cost basis, and you report no additional gain or loss.
