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If a partner sells their interest in the partnership, but has a negative capital account, does the adjustment to the capital account to make it zero show as a capital gain to the partnership with a special allocation to the partner that is selling their interest?
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Here's wishing you many Happy Returns
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Put a note on the K-1 along the lines of: At the time of the sale of your interest in this partnership you had a negative capital account of XXXX. This may result in taxable income to you. Consult your tax advisor. Also you're filing Form 8594 8308, right?
Ex-AllStar
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great suggestion regarding note on K-1; thanks sjrcpa! I wasn't going to file the 8594 because I'm not doing the partners returns. This should be filed with the individuals returns correct?
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Yes 8594 would be part of the 1040 forms to be filed. The partnership may have to file 8308.
Here's wishing you many Happy Returns
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I meant Form 8308. Sorry.
Ex-AllStar