I have a situation and I believe that I am over thinking it.  The situation is in 2021 an S Corp will be dissolving and terminating operations.  The S Corp is owned !00% by one person.  Through the years he advanced the company $50,000 and will never be repaid.  My first inclination is to run it through the AAA account to zero everything out and on his personal return take short term capital loss as a non business bad debt.  Which is what I prefer to do.

When I started overthinking this I said to myself should the company have COD income because they did not repay the shareholder loan.  If I do this then the shareholder will get no tax benefit at all since the COD income will be included in the K-1 for the same amount as the non business bad debt that I will be taking.  These two transactions will offset each other and he will get no tax benefit.  

I believe my first approach is correct.  Let me know what the community thinks about this.

Thanks for your time.

John Skouberdis