Oh!  Duh.  I am a CPA but this is my first year entering the tax arena (and lets just say it's been a while since I sat for the exams...).  I am helping out a couple existing bookkeeping clients with their taxes and assumed that previously filed tax returns were correct so I was confused when the debt basis included loans NOT from the shareholder to the S Corp.  I guess my questions now are:

 - can I just create a correct Shareholder basis schedule for 2021 tax year or do I need to correct the prior year return as well? 

- The S Corp tax return Shareholder Basis Schedule stated the loss was disallowed for the shareholder but the shareholder's personal tax return claimed the entire loss - shouldn't that have been carried forward rather than claimed in full? 

- The Shareholder had distributions in excess of stock basis but somehow this did not trigger capital gains tax on the Shareholder's personal tax return - is there some trick I'm missing that would prevent the shareholder from having to pay or was it because the debt basis was incorrectly overstated?

Thank you in advance for your assistance - I really appreciate your patience.

Best,

Becca