But even with the 7203 is there anything that links back and limits the loss in excess of basis on Sch E?  This has been a manual process with ProSeries forever unless that's changed in the past couple years.

I think TGB suggests you reduce the loss on the K-1 Wks to the allowed amount.  I've always added a second K-1 line for ABC Corp - Loss in excess of basis with an offsetting positive number.  I've seen some people suggest using the 6198.  Not quite the right approach but it probably gets you to the same tax result.

Circling back, if they didn't lose their own money, whose money did they lose?

Rick