Hi there. I am running into this issue now but use ProSeries - same problem though.

It seems the way the IRS wants this handled is...

Shareholder distributions exceed basis so basis =$0

Capital Gains are reported on the Individual 1040 but according to what I've been reading: it is NOT reported on the K-1... so HUGE margin for error here...

Anyone completing the Individual return must know about the excess basis to report it as LTGC on the 1040.

Basis is NOT increased because it is only getting UP to $0 by reporting the LTCG.