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Contribution to capital
A contribution to capital denotes the money or the property contributed to a corporation by either a stockholder or a nonstockholder. Where a stockholder advances money to a corporation, the tax question on insolvency of the corporation is whether the money was advanced as a loan or as a capital contribution. If it is a capital contribution, the stockholder may not deduct a nonbusiness bad debt. When a nonstockholder makes a contribution to a corporation, such as payments by a city to a manufacturer for moving its factory to the city, the contribution is not income to the corporation. The basis of property as contributed (or property purchased with money contributions) is zero. If money is contributed and as property is purchased with it, the basis of the corporation's assets is reduced.