Formation and Contributions
Transferring Property to an S Corporation
The tax treatment of forming an S corporation generally follows the same formation principles applicable to C corporations. Property transfers may qualify for nonrecognition treatment when statutory requirements are satisfied.
- Cash contributions.
- Property contributions.
- Stock issued in exchange for property.
- Services exchanged for stock generally produce compensation income.
Note
Formation questions often require distinguishing between property transfers and compensation for services.
Summary
Most qualifying property contributions occur without immediate gain recognition.