| The capital gain for the S corporation is really the extent of the sale price (that is equal to your pro-rata share or % ownership) less original investment further reduced by losses. In other words, your adjusted S corporation basis is 30k - 12.5k = 18.5 k. Your sale price is $20k. Hence gain to you would be 20k - 18.5k = 1.5k.
The distribution has no tax impact as you have sufficient basis to take the distributution. In conclusion, the taxable impact of this transaction is a net K-1 capital gain of 1.5k, which is really a long term capital gain. | 
