Improved sgets implementation. Notice that if you allocate input string dynamically, you need to save original pointer to free it later.

sgets_improved.c

lude <stdio.h>
#include <string.h>
#include <stdlib.h>

static char* sgets(char* dst_str, int dst_size, char** input_str)
{
    // safety check, probably removed out in performance-centric code
  if (input_str == NULL || *input_str == NULL)
    return NULL;

  // if end of the string from previous iteration(s)
  if ((*input_str)[0] == '\0')
  {
    return NULL;
  }

	int size_count = 0;
  // access value-only from input string
  const char* input_str_val = *input_str;

	for (int i = 0; i<dst_size; ++i)
	{
		char c = input_str_val[i];

		if (c == '\n')
		{
			dst_str[i] = c;
			dst_str[i+1] = '\0';
      ++size_count;
			break;
		}
		else if (c == '\0')
		{
			dst_str[i] = c;
			break;
		}
		else
		{
			dst_str[i] = c;
			++size_count;
		}
	}

  // update input str with number of bytes we've read
  // effect address back to the caller
  *input_str = (char*)((long)(*input_str) + size_count);

	return dst_str;
}

int main(void)
{
#define STR "This is first line.\nThis is second line.\nThis is third line.\nThis is last line."
  char* orig_str = malloc(sizeof(char) * (strlen(STR)+1));
  printf("address of orig_str pointing to = %p\n" , orig_str);
  char* opt_str = orig_str;
  printf("address of opt_str  pointing to = %p\n" , opt_str);
  strncpy(opt_str, STR, strlen(STR)+1);
  char line[256];

  while (sgets(line, 256, &opt_str) != NULL)
  {
    printf("%s", line);
  }

  printf("address of orig_str pointing to after operation = %p (should stay the same)\n" , orig_str);
  printf("address of opt_str  pointing to after operation = %p (should changed)\n" , opt_str);
  free(orig_str);
  return 0;
}