IRS Will Not Extend Section 118 Capital Contribution Concepts To Noncorporate Entities


Gross income generally includes all income from whatever source derived. At times, entities may receive amounts from nonowners that enhance its capital. For example, local government or groups may make contributions to encourage an entity to set up or expand business in a locality. Are such transfers gross income to the entity?

Code §108 provides that in “the case of a corporation, gross income does not include any contribution to the capital of the taxpayer.” Thus, such capital contributions are not gross income to a corporation.

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