Idiot Shareholder A contributed all of their Social Security Income into the S Corp, as a shareholder loan. The S Corp goes on it's merry way and does business and reflects this Loan on it's balance sheet and issues K-1's. Shareholder A still reports their Social Security Income on their tax return, along with any income/loss from the K-1 that comes from the S Corp. 

Sounds perfectly normal to me. I have never ,met a S Corp that really functioned like a business.