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Old 11-09-2007, 12:21 PM
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Shareholder basis

I recently incorporated with 200 no par shares. For the time being I will be the only shareholder, director, officer, etc. I also have a full time job.
How do I put money into my company (from savings, salary)? I know that I can buy shares, but is there another way to increase my basis? Should I only buy a few shares at, let's say $100/share, or I can buy them all and put money in the corporation in some other way.
As the end of the year is pretty close, what happens if I don't have any income at all. I know I still have to file taxes, but do I get away with paying myseld no salary? My expenses for the business are very low and my basis can easily handle it.

Thank you!

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Old 11-29-2007, 04:52 PM
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How can one increase shareholder basis in a Corporation?

Increasing Shareholder Basis.
Firstly, I would like to ask you why you want to increase your basis in the corporation? If there is a compelling reason, then here are some of the ways of accomplishing that.

1.Firstly, you can contribute assets into the business, thus increasing your basis, the transaction being debit fixed assets and credit additional paid in capital.

2.The second way is to make a loan to the corporation. However, you must have a written document specifying repayment terms and interest rate of the loan. This means you will get a 1099-Int at the end of the tax year from the corporation.

3.The third way, which generally is the least favored method of increasing shareholder basis is to purchase more shares in the corporation. The disadvantage with this method is that you will not be able to take this money out with incurring a capital gain or loss transaction, ie triggering a reportable event.

Filing requirements for a corporation with limited income.
The IRS requires you to file a corporation tax return even in situation's where there is no taxable income. Furthermore, to answer your question, it is perfectly reasonable not to take a salary when the corporation does not have the wherewithal to pay you a compensation.

The key factor to bear in mind is that there is sufficient basis to deduct the losses in 2007. Hence, you should try and ensure that there is sufficient basis that will offset the losses in 2007. If there is not enough basis, then I would suggest that you increase basis at least to the extent of the losses.

Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.

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