If your question is "What is this asking me to do?" I think I can help by paraphrasing the original question (posing the same question in a different way).
Write a program that takes as input text with spaces and produces as output visually equivalent text using tabs to the maximum extent possible.
For example, with tabstops every 8 characters, and showing spaces as '.' and tabs as '-';
input;
".foo:...bar;......#comment"
output;
".foo:-bar;-..#comment"
input;
".......-foo:.....bar;......#comment"
output;
"-foo:-.bar;-...#comment"
Write the program so that tabstop parameter n can be varied, i.e. allow values of n other than 8. Be prepared to justify your decision to make n a constant, or alternatively a variable.
Edit I had a look at your code and I think it is more complex than it needs to be. My advice is to do it a character at a time. There's no need to buffer a whole line. Maintain a column count as you read each character ('\n' resets it to zero, '\t' bumps it by 1 or more, other characters increment it). When you see a space (or tab), don't emit anything right away, start your entabbing process, emit zero or more tabs and then spaces later (at '\n' or a non whitespace character, whichever comes first).
A final hint is that a state machine can make this kind of algorithm a lot easier to write, validate, test and read.
Edit 2 In a shameless attempt to get the OP to accept my answer, I have now gone ahead and actually coded a solution myself, based on the hints I offered above and my comment in the discussion.
// K&R Exercise 1-21, entab program, for Stackoverflow.com
#include <stdio.h>
#define N 4 // Tabstop value. Todo, make this a variable, allow
// user to modify it using command line
int main()
{
int col=0, base_col=0, entab=0;
// Loop replacing spaces with tabs to the maximum extent
int c=getchar();
while( c != EOF )
{
// Normal state
if( !entab )
{
// If whitespace goto entab state
if( c==' ' || c=='\t' )
{
entab = 1;
base_col = col;
}
// Else emit character
else
putchar(c);
}
// Entab state
else
{
// Trim trailing whitespace
if( c == '\n' )
{
entab = 0;
putchar( '\n' );
}
// If not whitespace, exit entab state
else if( c!=' ' && c!='\t' )
{
entab = 0;
// Emit tabs to get close to current column position
// eg base_col=1, N=4, col=10
// base_col + 3 = 4 (1st time thru loop)
// base_col + 4 = 8 (2nd time thru loop)
while( (base_col + (N-base_col%N)) <= col )
{
base_col += (N-base_col%N);
putchar( '\t' );
}
// Emit spaces to close onto current column position
// eg base_col=1, N=4, col=10
// base_col -> 8, and two tabs emitted above
// base_col + 1 = 9 (1st time thru this loop)
// base_col + 1 = 10 (2nd time thru this loop)
while( (base_col + 1) <= col )
{
base_col++;
putchar( ' ' );
}
// Emit buffered character after tabs and spaces
putchar( c );
}
}
// Update current column position for either state
if( c == '\t' )
col += (N - col%N); // eg col=1, N=4, col+=3
else if( c == '\n' )
col=0;
else
col++;
// End loop
c = getchar();
}
return 0;
}