Thank you for your response. You don't need to go thru the accounting part of my question. I just need  how to handle the capital loss on sale of the business in ProSeries. Do I need to show it on sch K-1 and how ? Or I just show the loss on form 4797 on the personal tax returns ? If I zero inventory, cost of goods sold will increase and I don't think it's appropriate to show the sale of business thru regular operating loss as you described. 

Thanks