The final distribution you received is NOT the sales price, if you did indeed sell your partnership interest. If the partnership dissolved and you didn't receive payment from a third party (or another partner) for your interest, indicate that you disposed of the investment, but not by selling it. If you were paid by a third party, then the amount you received for your interest would be the sales price.
If you received a final distribution that was reported on your final K-1, your ending adjusted basis should be reduced by that distribution. The calculation would be:
- Initial Contribution
- Less: Total Distributions
- Plus or Minus Net income/loss allocated to you since inception
- = Final adjusted basis
The IRS provides a Worksheet for Adjusting the Basis of a Partner's Interest in the Partnership to help you make this calculation correctly.
If you received total distributions that exceed your adjusted cost basis, any amount over your basis is taxed at the ordinary income tax rate and is not capital gain.
Please note that the Capital Account Analysis that appears on Schedule K-1 is not necessarily your true investment basis. Be sure you include the net income information from your final K-1 when completing the IRS worksheet.
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