SECTION 2. BACKGROUND

Section 118(a) of the Internal Revenue Code provides that in the case of a corporation, gross income does not include a contribution to the capital of the taxpayer. Section 1.118–1 of the Income Tax Regulations provides that § 118 applies to contributions to capital made by a person other than a shareholder, for example, contributions of property to a corporation by a governmental unit for the purpose of enabling the corporation to expand its operating facilities.

Section 362(c)(2) requires a basis reduction in a corporation’s property when the corporation receives money from a nonshareholder as a contribution to its capital.

Rev. Proc. 2010–46, in part, provides a safe harbor under § 118(a) for certain

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1998 or to amounts received for any TIGER planning grants.

Further, this revenue procedure does not apply to noncorporate taxpayers.