In my opinion, The Corporation should either file the forms to report the payment as W-2 Wages, or file a 1099-Div to report the payment as a Dividend to the shareholder. (unless of course there were some prior loans from the shareholder to the corp. that were still outstanding.)

W-2 wages may be more correct, but I don't have enough information about time involved in the transactions by the owner, etc. that might help determine if the payment was for work, or more of a return on investment.