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How to calculate shareholder basis when forming a C Corporation?

C Corporations are formed by shareholders contributing property, cash, or services in exchange for shares in the company. For tax purposes, the shareholder must calculate their basis in the C Corporation.

The basis of the stock received by the shareholder upon the initial formation will include:

1) Cash contributed by the shareholder.

2) The NBV of all property contributed (less than any debt in addition to the property).

3) Services (FMV) of services contributed will be included as ordinary income.

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