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    S-Corporation Taxation: Two shareholders, cash and services

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    What happens if two individuals form a S-Corporation? One person contributes $100,000 for 50% ownership, and the other person contributes services for a 50% interest. What are the tax consequences of this transaction?

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    https://brainmass.com/business/accounting/s-corporation-taxation-423470

    Solution Preview

    There are two important concepts in dealing with this issue:

    1. The contribution of services in exchange for stock is a taxable event to the contributing shareholder. If we assume that the fair market value of the services is $100,000, then the transaction is fairly straight-forward. The contributing shareholder will recognize income ...

    Solution Summary

    This solution discusses the tax consequences incurred when two individuals form an S-Corporation.

    $2.19

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