Line 16b. Other Tax-Exempt Income Enter on line 16b all income of the corporation exempt from tax other than tax-exempt interest, for example, life insurance proceeds - not taxable but is treated as income for purposes of determining basis, but see section 101(j) for limits and reporting
requirements). Generally, under section 1367(a)(1)(A), the basis of the shareholder's stock is increased by the
amount shown on this line. this line would show PPP loan forgiveness.
reporting by the S-Corp must comply Rev-Proc 2021-48
https://www.irs.gov/pub/irs-drop/rp-21-48.pdf
in effect, you get the double benefit. the forgiveness isn't taxable and it increases your basis to be able to deduct losses and expenses
