@dnelson225
The answer to your question is "No", the AAA does not need to be zeroed out.
This account just tracks undistributed income at the entity level and has no impact on the end result at the shareholder level where the ultimate gain or loss on the investment is determined.
Keep in mind, that the AAA is an entity level account and is not the same as a shareholder's tax basis; which is the key to determining the overall gain or loss.
Finally, any liquidating distributions should be reported on form 1099-DIV and not on the final S corporation return or K-1; which also means that these would not flow through the AAA either.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
