You are correct, the investment loss is reported on form 8949, not Form 4797. The investment loss is reported on your personal tax return.
On the final tax return for the business, you should have reported the disposition of any assets. That may have resulted in a loss with respect to the assets, which would be reported on a Form 4797 on the S corporation tax return. The difference between the receipts and expenses of the business in the final year may have resulted in a loss as well, which you can reflect as a business loss on your personal tax return, from the form K-1 of the S Corporation.
Your basis in the business after it is closed is what you would report as a loss on investment on your personal tax return. Your basis would basically be what you invested in the company plus income from the business you reported as such on your personal tax return and minus losses from the business that you reported on your personal tax return. Also, you would subtract from your basis any money you withdrew from the business. That is the amount you would report as a loss on investment on your personal return and it would be reflected as a capital loss. It is available to be carried over to future years to offset capital gains and can be written of each year up to $3,000 in capital losses.
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