NAV, Capital Account,
Tax Basis And Sale Price:
Why The Numbers Differ

An investor reviewing a private fund or partnership position may find one amount on an account statement, another on Schedule K-1, and a different figure in a purchase offer.

That difference can be confusing. If an account statement shows $50,000, does that mean the investment can be sold for $50,000? If the capital account is lower, does it establish a loss? If a purchaser offers less than the original investment, will the sale necessarily produce a tax deduction?

Each question requires a different set of information.

Before comparing amounts, identify the investment’s legal structure, the document each figure comes from, the calculation method, and the applicable date.

Four Numbers,
Four Different Purposes

An agreed purchase price, the cash received after transaction costs, and the amount realized for tax purposes can also differ. Identify which figure is being discussed before comparing amounts.

Not every investment reports all four figures. Partnership capital-account concepts should not automatically be applied to corporate BDC or REIT shares.

What NAV
Tells You

The SEC defines net asset value as an investment company’s total assets minus its total liabilities. A per-share calculation divides the applicable net assets by the outstanding shares. Share classes and fund-specific valuation policies can affect the calculation.

For a private or non-traded investment, understanding the reported NAV requires more than reading the headline amount.

Check:

• The valuation date.
• Whether the figure covers the entire fund, one share class, or your position.
• The valuation methodology and assumptions.
• Whether later financial reports identify material changes.
• Whether an available repurchase program actually uses that NAV.

A recent account statement may display a valuation calculated as of an earlier date. Confirm the valuation date and methodology rather than assuming the statement date is the valuation date.

A published NAV also needs to be considered separately from the ability to sell. An issuer’s repurchase terms may impose conditions, and a private purchaser may propose a different price.

AIL’s guide to selling non-traded BDC shares explains how pricing dates, repurchase deductions, and acceptance limits can affect potential liquidity.

Investors researching a specific holding can also review the Blackstone Private Credit Fund profile . Its applicable disclosures and offer documents should be reviewed separately from any statement value or proposed purchase price.

What A Capital Account
Tells You

A partnership capital account tracks capital under a particular accounting framework. Its movements can reflect contributions, allocated income or loss, distributions, and other adjustments.

The accounting method matters. A capital account in a fund’s financial reporting may use a different method from the tax-basis capital account reported in Item L of Schedule K-1, Form 1065.

The IRS instructions for Form 1065 explain that tax-basis capital reporting accounts for contributions, tax income or loss, withdrawals, distributions, and other adjustments. They also caution that the resulting balance may differ from the partner’s adjusted tax basis in the partnership interest.

Before interpreting a capital balance, ask:

• Which accounting method produced it?
• What period does it cover?
• Have subsequent contributions or distributions occurred?
• Is the figure for the exact interest being considered for sale?

The balance alone does not establish an amount the investor can withdraw. Withdrawal and distribution rights must be checked against the governing documents.

For investment-specific research, AIL’s Walton partnership overview and AEI investment overview link to selected program profiles. Identify the exact fund and legal structure before interpreting its statements or capital-account reporting.

Why Capital Account
And Tax Basis Can Differ

For an interest in an entity taxed as a partnership, the investor’s adjusted basis in the interest is often called outside basis.

It can change over time through contributions, allocated income and losses, distributions, and changes in the investor’s share of partnership liabilities. The IRS explains that basis must be determined as of the disposition date when an interest is sold. The original investment amount may therefore be insufficient for evaluating a later sale.

The IRS Partner’s Instructions for Schedule K-1 specifically caution that Item L does not establish the partner’s adjusted outside basis.

One important difference is that outside basis generally includes the partner’s share of partnership liabilities, while tax-basis capital does not. Partner-specific adjustments and other differences may also apply.

A tax professional may need historical K-1s, acquisition records, distribution history, and a separate basis schedule to reconcile the amounts.

What Determines
A Potential Sale Price

A private sale price reflects the terms a particular purchaser and seller are willing to accept.

Factors to evaluate may include the investment’s financial condition, expected future distributions, remaining holding period, transfer restrictions, purchaser availability, and transaction requirements.

A proposed price should be compared with the alternatives actually available for that position. Relevant questions include:

• Is an issuer repurchase currently available?
• How much of the position could be accepted?
• Which valuation date and deductions apply?
• What conditions remain before a private transaction can close?
• When would the seller receive payment?

For a partnership position, AIL’s guide to selling a limited partnership interest explains the document-review and transfer-approval process.

The Same Position,
Different Figures

Consider a hypothetical partnership interest with these figures:

These amounts are hypothetical and are not an AIL offer or valuation.

The $42,000 figure provides a reported valuation reference. The $18,000 figure serves a capital-account reporting purpose. The $24,000 figure describes the proposed purchase consideration.

Those amounts do not provide enough information to calculate taxable gain or loss. The investor’s adjusted outside basis and the tax treatment of the transaction still need to be established.

The original $50,000 investment also does not show the investor’s complete economic experience. A review would need to consider prior distributions, additional contributions, and other relevant cash flows.

Why A Discounted Sale
Does Not Automatically
Create A Tax Loss

Selling below original cost or reported NAV does not, by itself, establish a deductible tax loss.

For a partnership interest, the tax calculation generally compares the amount realized with adjusted outside basis. Amount realized can include relief from the seller’s share of partnership liabilities, even though that relief is not cash paid to the seller. Certain portions of the result can receive ordinary-income treatment under partnership tax rules.

IRS Publication 541 explains these distinctions, including liability relief and the treatment of amounts attributable to unrealized receivables and inventory items.

Tax classification matters as well. An LLC’s name does not establish its federal tax treatment, and partnership rules should not automatically be applied to corporate shares.

A proposed transaction should be reviewed using the rules applicable to the actual investment and ownership arrangement.

Check The Dates Before
Comparing The Numbers

Two correctly calculated amounts may still be unsuitable for direct comparison.

A year-end K-1 capital account, a midyear NAV, and a purchase offer made several months later describe different points in time.

Before drawing a conclusion, confirm that the comparison uses:

• The same investment and share class.
• The same quantity or ownership interest.
• Clearly identified valuation and reporting dates.
• Any intervening distributions or contributions.
• Consistent treatment of transaction adjustments.

A distribution between the valuation date and closing may also affect the agreed purchase consideration. The transaction documents should explain how it is treated.

Questions About
Investment Values

Is The Value On My Statement What I Can Sell For?

It should not be assumed to be an available purchase price. Identify the source and date of the statement value, then review the terms of any actual liquidity option.

Is My K-1 Capital Account My Tax Basis?

Not necessarily. The IRS distinguishes the reported capital account from the partner’s adjusted basis in the partnership interest.

Does Selling Below NAV Mean I Have A Tax Loss?

No. A discount to NAV measures the relationship between a price and a valuation reference. It does not establish the seller’s tax result.

Can An Offer Be Evaluated Using The Price Alone?

A useful review also considers quantity, timing, conditions, potential costs, and available alternatives.

Where To Begin

Start with a recent account statement, the latest valuation report, and any proposed purchase terms. For a partnership interest, gather the relevant K-1s and ask your tax professional to confirm the adjusted basis.

AIL’s Private Fund & Partnership Investment Directory provides starting points for identifying selected investments and their structures.

For information about the review process, visit Private Fund & Partnership Liquidity Options . Investors and financial advisors can submit a position through AIL’s Confidential Investment Review .

Ferrel H. Raskin

Ferrel H. Raskin is the Founder and Chief Executive Officer of Alternative Investment Liquidity, LLC. He leads the firm’s strategic direction, investor outreach, business development, and evaluation of illiquid alternative investment opportunities.

Alternative Investment Liquidity focuses on potential liquidity solutions for non-traded REITs, Delaware Statutory Trust interests, limited partnership interests, private placements, and other difficult-to-transfer investment positions.