there isn't enough data to give you a definitive answer.
first if the S-Corp had income for the year that restores tax basis in the debt before repayment.
is the debt actually open-account debt?
On October 20, 2008, the IRS issued final regulations on open account debt. The regulations define the term “open account debt” as shareholder advances not evidenced by separate written instruments and repayments on the advances, the aggregate outstanding principal of which does not exceed $25,000 of S corporation indebtedness to the shareholder at the close of the S corporation’s tax year. The regulations also provide that advances and repayments on open account debt are treated as a single indebtedness.
Under the final regulations the determination of whether the threshold balance of $25,000 is exceeded will generally be made at the end of the tax year of the S corporation. However, if all or part of the open account debt is disposed of before then, the final regulations require the determination to be made immediately before the disposition of the debt during that tax year.
The new regulations are effective October 20, 2008, and apply to shareholder advances and corresponding repayments made on or after that date. They do not apply to open account debt that is outstanding prior to October 20, 2008, or to corresponding repayments on that debt.
The final regulations do not address the character of gain on the repayment of unwritten advances that do not qualify as open account debt under the regulations. However, it appears that the treatment of unwritten advances exceeding $25,000 as being evidenced by a separate written instrument is only for purposes of determining the timing and amount of gain recognized on repayment. Accordingly, it is likely that gain recognized on the repayment of such debt will be ordinary. Shareholders should consider evidencing all loans made to their S corporations in writing; gain on the repayment of a debt that is evidenced by a written instrument should generally be capital gain.
If there is income Turbotax should automatically use the income to restore debt basis
wage an income section
sale of business property start or update
no on next screen - held more than 1 year
yes on next screen you sold property held less than 1 year
select held one year or less on next screen
continue
enter data for description something like repayment of reduced basis s/h debt
date acquired use 1/1/2023
date sold 12/31/2023
these dates are sort of required so it does not appear the holding period was more than 1 year.
