Removing Additional Paid in Capital from S-Corp

It is a distribution, regardless.

@Rick19744 

Concur with @Anonymous_ 

Thank you both!

I think I got it.  So either way, the SH distribution reduces your basis, but the additional paid in capital account remains at whatever amount has been put into it? 

Correct.  

You should have a separate account that reflects distributions to shareholders; an equity account.

This separate account essentially is tied to the retained earnings and would be summarized into this account on the balance sheet for the 1120-S tax return.