Yeah, I haven't ran into this before. That's why I want to make sure I handle this correctly.

I can't find anything that seems to address this situation. Research on APIC seems to indicate that distributions don't reduce APIC but can only be reported against RE.

However, in future year(s) as the shareholder is paid back, if the distributions are reported against RE and the "pay back of additional contributions" originally reported on the balance sheet as APIC are reported as reducing APIC, wouldn't that be acceptable?

Is there any reg that says APIC can't be paid back to a 100% S Corp shareholder? Is the expectation that if there is a reduction in APIC that there is a deemed sale of stock to the shareholder? I don't want the reduction in APIC to cause an IRS red flag in the future.

Thanks for your help.