Contributions to Capital from Nononers


Section 118 gives a corporation an exemption for a‘‘contribution to capital’’ received from a nonshareholder or a shareholder not acting as such. A typical transaction within the exemption is a transfer by a local government or business group to a corporation to induce the corpo- ration to locate its factory in the locality. The exemption dates back to early court decisions suggesting that transfers from governments and other nonshareholders were…
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