The reducer in the issue still fails.
I updated the description of the issue with the expected output.

I've added documentation to flang/docs/Extensions.md to describe how null values in list-directed input are interpreted here (13.10.3.2p2). It's the plain reading of "A null value has no effect on the definition status of the next effective item." and the portable interpretation across the most commonly-used compilers.

The reducer in the issue still fails. I updated the description of the issue with the expected output.

To clarify,
The output from the 1st read statement is still incorrect after this patch.
Flang still produces 1 3 4 where the expected output is 1 -1 3

New commit header comment:

[flang][runtime] Handle null list-directed fields in child input

When a "null" list-directed input field is encountered for a                                                                                                    
corresponding effective input item, leave it unmodified even
if it has a derived type with a READ(FORMATTED) defined input
subroutine.
                                                                                                                                                                
Fixes https://github.com/llvm/llvm-project/issues/154791, although
not with the result that was intended.