User talk:Scot1
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liquidating partnership question
thank you for your help on the question concerning liquidating partnerships. i appreciate it very much.
Stephanie1
Hi Scot,
Thanks so much for your reply to my post today (on 6/24). You'll have to forgive me, but I am still a little unclear as to what I need to do with this negative capital account balance. You said that if an S Corp receives a k-1 from a partnership showing a negative capital balance, the S Corp would recognize income in the amount of that negative balance. Is this ordinary income or a capital gain distribution?
Also, don't I need to look at their basis in the partnership instead of their capital balance? I know that basis can't go negative & of course I have no idea what the basis is. I am assuming that it would be zero since the capital balance is negative.
In this particular case, the capital balance is $(35,000)from the partnership's K-1 & the S Corp received a distribution from the partnership in the amount of $45,000. I appreciate any help you could offer on what I need to do because I am really confused.
Thanks much!!!!!!!!!
