Where does S Corp shareholder cash contribution to the company get reported?

[David]

Sole shareholder of S Corp did not take any distributions but contributed cash to the business. The business incurred a loss in 2020.

How does the cash contribution get reported? To Retained Earnings as a negative distribution or to Additional Paid in Capital?

It seems as though APIC would be the correct treatment. Will the shareholder receive basis for the cash recorded as APIC? Can APIC be reduced for any future distributions once retained earnings are reduced?

Thank you for your help.

[Abby Normal]

APIC and yes it increases basis. Enter it on the basis tab of the K1 in ATX.

You never reduce APIC. Distributions close to Retained Earnings.

[Lee B]

5 hours ago, Abby Normal said:

APIC and yes it increases basis. Enter it on the basis tab of the K1 in ATX.

You never reduce APIC. Distributions close to Retained Earnings.

What if your distributions have zeroed out Retained Earning? Wouldn't distributions then reduce APIC or do you end in a partial liquidation?

[Abby Normal]

On the books, I never do it that way, I just let Retained Earnings go negative. Same on the tax return, since that's where it flows (M2). And there's an M2 reconciliation to RE in worksheet for M2 where you have to enter the amount by which distributions are higher than what the M2 shows as distributions.