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client gone. lol

Then I vote:

I'm wondering how she can have capital gain. Did the partnership just make a book entry to even the capital accounts? I don't see how that would make her have a capital gain. Was the capital gain reported on her K-1? I'm not sure I'm following what actually took place at the partnership level and what the source of a capital gain was.

Well... maybe and maybe not. she has an outside basis to consider. Partnership losses would not have been deductible if she didn't have outside basis and she may have outside basis. That book basis on the partnership may be immaterial. Partnership agreement and Outside basis rules.

K-1 should be marked final, and you would mark that box on the K-1 input on the individual return. Input the disposition and resulting gain or loss on Schedule D like you would any other capital investment sold or disposed of.

These situations are always tough, because when a client really needs the money and they don't realize they could lose nearly half of the withdrawal due to Fed & St taxes and penalty it is really depressing to them when we tell them the reality. The sales people should tell them what could happen, and to be sure they have plenty of money in reserve, especially in the early years of the contract when mostly interest is paid out. But I am sure it may only be mentioned briefly or not at all, why jeopardize a sale and a larger commission. Those are the people who need Rita's special hug.

Dear soon-to-be ex-client: Buh Bye!

But she has very long arms from wearing pink furry handcuffs, don't you know.

I would not ask too many questions of Rita. She has this really large back yard....

That was just a general statement for illustrative purposes. Any resemblance to actual persons, living or dead, is strictly coincidental.

Well, I got a good chuckle out of "It's a tax return! Not tracking meteors here." Reminds me of that time I called ATX in January 2013 and said, "Look. I want my software to work. Taxes are not sexy. I don't care about the bells and whistles and pink furry handcuffs and blindfolds. Please just give me software that works." Then I got a hum dinger computer, and it worked. Go me.

Your client has obviously become the unwelcome recipient of the infamous "enhanced electronic screening", a black hole from which some tax returns are never seen again

I am so glad to know another Buffy fan! Good luck! I hope that you have a better weekend.