how do you enter sale of partnership interest to another partner on form 1065 and k-1?===========> The sale or exchange of a partner's interest in a partnership usually results in capital gain or loss.. Gain or loss is the difference between the amount realized and the adjusted basis of the partner's interest in the partnership. If the selling partner is relieved of any partnership liabilities, that partner must include the liability relief as part of the amount realized for his or her interest. Kumar became a limited partner in the ABC Partnership by contributing $10K in cash on the formation of the partnership. The adjusted basis of his partnership interest at the end of the current year is $20K, which includes his $15K share of partnership liabilities. The partnership has no unrealized receivables or inventory items. Kumar sells his interest in the partnership for $10K in cash. He had been paid his share of the partnership income for the tax year. Kumar realizes $25K from the sale of his partnership interest ($10K cash payment + $15K liability relief). He reports $5K ($25K realized − $20K basis) as a capital gain.you need to complete Part I and Part II, Items E through I, on each partner's K-1. This is used to provide personal information.and also complete Part III of each partner's K-1. This is used to distribute profit and loss to each partner based on the partnership agreement. Also complete the selling partner's K-1. Complete Section J, indicating that at the end of the reporting period the partner's share of the profit, loss and capital accounts have all been reduced to zero. Complete Section K, indicating that at the end of the reporting period the partner's share of the partnership's liabilities has been reduced to zero.Complete Section L to reflect any increase or decrease in the partner's capital account for the current reporting period and indicate that any remaining balance in the capital account was distributed to the partner. The computation should result in an ending capital account balance of zero. Check the box at the top of the form indicating that this is the partner's "Final K-1; Complete the remaining partners' K-1s. The remaining partners' profit, loss and capital accounts (Item J) should increase to offset the decrease on the selling partner's accounts according to the partnership agreement. For instance, if the partnership agreement calls for an equal split between all the partners and one of three partners is leaving, the remaining two partners would have their accounts increased by roughly 16.66 percent (half of the 33.33 percent relinquished by the departing partner).Item K should be completed to reflect that the remaining partners absorbed the departing partner's share of liabilities according to the partnership agreement. For purposes of completing Section L, the liquidation of the partnership interest will have no direct impact on the remaining partners' capital accounts.