Sorry, Jeff. I didn't see your last post before I sent my last post.

OK, so the shareholder will get basis for his contributions in excess of distributions. Is the correct way to handle this still to record it as APIC?

Then, as my last post addresses, when the company pays back the APIC, it will be reported as reducing APIC and basis. It will not be recorded as Distributions. 

My concern is that if the tax return balance sheet shows a reduction in APIC, does the IRS expect to see a deemed sale of stock holder shares?

Thank you.