Final K-1 with balance in capital account

Taxpayer received a Final K-1, but there is still a balance in the ending capital account in Box L, Partner's Capital Account Analysis, of $4600. I have never seen this before. Generally a final K-1 has a -0- in ending capital. Anyone have any idea of how to approach this? There is a note on the K-1 "Footnotes" that says : This final return may create gain or loss on the disposition of your membership interest in the LLC.

If the $4,600 is, in fact, the TP's correct capital account balance, then I believe that the TP has a loss in termination of partnership on Schedule D.

K-1 is marked Tax Basis correct? If so, it's what GSTax said.

K-1 is marked Tax Basis correct? If so, it's what GSTax said.

All K-1 capital accounts are tax basis now. There are no other options allowed.

Thanks to both NCCPA and CaptCook. I think that what I was getting at was that it is possible that the taxpayer's Outside Basis is different that his Inside Basis.

If the $4,600 is, in fact, the TP's correct capital account balance, then I believe that the TP has a loss in termination of partnership on Schedule D.

Maybe, but the taxpayer's outside tax basis is not reflected on the Schedule K-1, so you don't know if there is a loss/gain on schedule D.

I am still puzzled when there is an ending balance on a final schedule K-1, but fortunately it's a rare sight. I don't understand what would create the balance as I would expect the capital balance to be either reduced to zero through expenses or distributions if the partnership is ending.

IMO, 99% of these instances are due to improper allocation of income somewhere along the partner's ownership.

I am looking at a final K1 (publicly traded partnership) with a -$15,500 capital account. There was a $27,000 LTCG on the sale. What does that -$15,500 Capital Account mean? Is it an offset to the gain? Already sent this to a CPA as it is over my pay grade as they say.

The PTPs usually provide additional info about how to adjust the basis up or down from original cost, how to compute the gain or loss on sale, and how much is ordinary income upon sale.

These questions about ending capital showing up on a final K1 are a bit odd. If you’re tracking basis each year, as you should be, then you know the basis, so there shouldn’t be any questions. And it is a good practice to reconcile year-end basis to the ending K1 capital account.