Your Ask Joey ™ Answer

How to calculate the shareholders gain on property contributed to a C Corporation?

Shareholders can contribute property to a C Corporation in exchange for shares in the corporation. Under certain situations, the shareholder might have to recognize a gain on the contributed property.

To understand if a gain should be recognized, the shareholder should start with the debt assumed by the corporation and subtract their net book value (adjusted basis) in the property. If the debt is greater than the NBV of the property, then the shareholder will recognize a gain.

However, there are a few exceptions to the rule that would prevent the shareholder from having to recognize a gain. Shareholders will not be required to recognize gains for contributions made to corporations if they meet the following tests:


Back To All Questions

You might also be interested in...

  • Three Reasons to Become an Accountant

    If you’re someone who is intrigued by numbers, enjoys problem-solving and wants to help others, then accounting might be the perfect career for you. While some people may be put off by its unalluring reputation, accounting is an excellent career choice that has many benefits. In this article, we look at three of the reasons...

  • Qualified Retirement Planning: Tax Advantages & Disadvantages

    Home Advantages and Disadvantages of Tax-Free and Deferred-Tax Retirement Plans What are “qualified retirement plans” and how can they be effective for tax planning? Well, there are plenty of tax savings advantages to individuals contributing to tax-free retirement accounts, as well as tax-deferred retirement accounts. However, this doesn’t necessarily mean that there are no disadvantages...

  • CPA Evolution Survival Guide

    Download Your eBook by selecting the download icon in the top right-hand corner