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?
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?