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Returning Member

Final K-1, Negative ending capital account

The LLC - taxed as a partnership - that I was invested in ended operations and dissolved in 2020.  My final K-1 shows a negative capital account.  My understanding is - and perhaps it's wrong - is that this negative number should show up on Sched D (perhaps via another form) as a capital gain.  If that is true, how do I get TT to make that entry?



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3 Replies

Final K-1, Negative ending capital account

Your capital account is not necessarily your basis which you should have been keeping track of since the beginning. So you need to do your basis calculations. If you have distributions in excess of your basis you can have a negative capital account and distributions in excess of basis would go on SCH D.



Returning Member

Final K-1, Negative ending capital account

Thanks for the reply.


Yes, I know that outside basis is not the same as "ending capital account".  What I'm trying to determine is if the negative ending capital account number should flow to any form on my return.



To add detail, the adjusted outside basis is quite small - about $1000.  There were never any distributions to me from the entity including at the time of dissolution.  The negative capital account is on the order of $10K mostly due to ordinary losses passed through - none of which I could use on any prior year's return due to the at-risk limitations.

Final K-1, Negative ending capital account

you invested $x. that would be increased by any items of income that flowed through to you (like interest income).  you received no distributions. this gives you your tax basis. thus over the life of the partnership, this would be the total losses you can deduct.  ordinary losses would come first. if you have any tax basis left it would be a capital loss.  what if you deducted more in losses than your tax basis. that would likely be ordinary income.  I'm assuming the reason for negative capital is that debt gave the partnership the ability to incur more in losses than was invested. when the partnership terminates debt decreases producing ordinary income under the tax laws.

here's a link to a worksheet you can use




by the way while you can enter sections K&L from the K-1. the numbers go nowhere. Turbotax does not use them.

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