I am filling a final S-Corp return. Have balance sheet showing zero balances. My question is whether how i got to the zero balances is proper. Corp sold all assets for cash and assumption of liabilities associated with the assets sold. The sale resulted in a profit. The books had shareholder loans (liabilities). I applied a portion of the profit from the sale to restore basis in the shareholder loan to the loan balance. Therefore no need to recognize income on the loan repayment. When all journal entries were made to zero out the accounts I was left with a negative retained earnings balance. Is it proper to offset the negative R/E account to capital stock? This is increasing the stock account. Also, the remaining amount of profit after loan restoration is increasing stock basis. There is no cash left so there will be no liquidating distribution. On the shareholder's personal return I would report the gain from the K1 and was going to take a 1244 stock loss for the sale of stock back to the corporation for zero dollars. The 1244 stock loss would be equal to the remaining basis. Am I treating this correctly? Thank you for any light shed on this matter.