most likely if that was a distribution of Accumulate Earning in the AAA account Schedule M-2 column a, no 1096/1099 should be issued. the only reporting for this type of distribution is on the shareholder's k-1, line 16 cash distribution and schedule M-2 column a line 7
on the other had if the S-Corp was once a C-Corp and had accumulated earnings and profits (AE&P) it is distributing, issuing a 1096/1099 is proper - no reporting on the k-1.
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the difference is that AAA distributions are not taxable to the shareholder, they do reduce your tax basis. only if they reduce your tax basis below zero is that excess taxable. distributions of C-Corp AE&P are taxable to the shareholder.
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issuing a 1099 for AAA distributions may cause issues with the IRS because they will be looking for them to be reported on your 1040 schedule B
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I should also point out that to distribute AE&P, if there is any, requires that an election be made and included with the return.
