Form 8881 credit and AAA account/Stock basis in Form 1120S

[hncpa]

S corp incurred qualified small employer pension plan startup costs during 2023 to be qualified for Form 8881 credit.

I followed the PTC input instruction below and then

Entering Form 8881 credit for small employer pension plan startup costs in ProConnect Tax (intuit.co...

1) Form 8881 automatically calculated for $500 credit, which seems correct

2) Automatically Form 1120S Line 22 ordinally business income AND Schedule K Line 1 ordinary business income was reduced by $500 to be $126,654, which seem correct.

3) AAA account on M-2 Line 2 shows $126,654, which seems correct. HOWEVER, $500 shows up in line 5 other deduction as Small Employer Pension Plan Startup Costs Credit, which seems incorrect like another reduction of $500 in addition to the expense reduction of $500 from ordinary business income.

4) Form 7203 Line 3a ordinary business income shows $126,654, which seems correct. However, $500 shows up in line 8a as nondeductible expense, which again seems like double reduction.

My question is whether Small Employer Pension Plan Startup Costs Credit reduces AAA account and Form 7203 shareholder stock basis in addition to the pension plan start up expense reduction.

Any comments are greatly appreciated!