Calculating my 'Partnership Basis' after selling all my interests in a ETL and receiving a final K-1

[GoSeeKen]

I sold all my interests in a ETL stock that I was a partnership in.  For simplicity, I invested $1,000.  Over the past couple years it increased in value, and I've been holding on to the investment.  It started going down, so I sold it all off.  Overall, I still had gains on my initial investment of $1,000.  I received my final K-1 that shows my final transactions:

NOTE:  Initial investment of $1,000 two years ago (in 2021).

2023 tax year K-1 shows:

     Part II ... Section L

          Beginning Capital $:  5,000

          Capital Contributed $:  0

          Current NET income(loss) $:  -1000

          Other increase (decrease) $:  0

          Withdrawals $:  (    4,000)

          Ending Capital $:  0

     Part III

          #5: 50

          #8:  -1100

          #11:  C    -50

          #13:  AE   25

Can I calculate my 'Partnership Basis' for this year with this information?  How would I do that given the data mentioned above?

[nexchap · Accepted solution]

@GoSeeKen Basis drops for any distributions you receive, or any K-1 item that lowers your tax bill (e.g., a box 1 loss).  Basis increase for any K-1 item that increases your tax bill (e.g., partnership interest earned).

Usually you'd receive a sales schedule with your final K-1 that spells out the basis adjustment.

[GoSeeKen]

Thanks.  However the only attachment was a ‘Transaction Schedule’ that only shows:

     BEGINNING YEAR SHARES:     200

     DESCRIPTION      DATE            SHARES

     Sell                          6/1/2023      -200

     END OF YEAR SHARES:                 0

There’s nothing regarding ‘Partnership Basis’.  After the transaction mentioned, I no longer have any ‘interest’ (own any stock) in this ETL.  My questions are for filling out the ‘Partner Basis’ value:

     - Since I sold everything, would that make my ‘Partner Basis’ 0 (zero) for filing purposes?
     - Or, should I use the ‘Beginning capital account’ in section ‘L’ from my ‘final’ K-1?

     - Or, should I use the ‘Ending capital balance’ in section ‘L’ from my K-1 from last year?

Keep in mind, I no longer own the stock since selling all of it last year.  Thanks for the help…!

[PatriciaV]

Schedule K-1 Section L reports your capital account from the perspective of the partnership (called "inside" basis). This is NOT your adjusted basis for your own records (called "outside" basis). To calculate this, you will need to gather all the K-1s you've received since you invested in this partnership. Then complete the Partnership Basis Worksheet provided in the IRS Partner’s Instructions for Schedule K-1 (Form 1065).

In simple terms, you start with your initial investment, add/subtract income/loss allocated to you each year, and subtract any distributions you received. There are other adjustments for items that may have been reported to you on Schedule K-1. That's why the IRS provides the worksheet. The adjusted basis as of the date you sold the investment is used to calculate and gain or loss from the sale.