Getting back to your original question where you asked "how much will be reported on the single shareholder's K-1", I think this could be a little bit of a trick question.  The reason I say that is because the correct answer is $7,000 will be reported as a loss on the shareholder's K-1.  If the original question was (using the original fact pattern):  How much of the S-Corporation loss would be deductible on the shareholder's individual tax return, then the answer would be $1,000.  The reason for this is that any basis / at-risk limitations that apply will be applied at the individual shareholder level, not at the S-Corporation level.  The S-Corporation will ALWAYS pass through the full loss on Schedule K-1 even if that loss will ultimately be suspended on the shareholder's individual tax return.  Hopefully this doesn't confuse you, I just wanted to make this point.