"If so, that would result in a reduction to the inside basis,"

It reduces the Equity. An asset was removed (money), so the equity is reduced.

"and an addition to his outside basis."

He did not invest into the entity. He took from the entity, more than was his, at that point in time. Perhaps you want to establish this as a shareholder loan (owed from the person) and the next year, if there is good income, the loan can be repaid by not taking that as distribution.

This also assumes there is not other shareholders.