You seems to be very knowledgeable about basis. If I could ask another question.

The client has beginning basis of 5k plus net income for 2020 of 50k minus distribution of 60k and non deductible expense of 3k. His distribution is in excess of his basis, and I know basis cant go below zero. So, to my understanding, I need to report 5k as capital gain, but then what happens next year and what happens with 3k non deductible expenses? His beginning basis as of next year is zero, correct? Since that 5k is reported a capital gain to him, we do not have to carry that amount forward to deduct from his basis next year, correct? And what happens with those 3k non deductible expenses?